Fd loan interest

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Anil Verma (Querist)
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30 November 2013 I have a Fixed deposit worth rs.6 lacs. against which I had availed loan of rs.3.50 lac. whether intt. accrued on loan account fetch rebate while calculating income tax. if so under which section

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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30 November 2013 No such rebate not allowed and u need to pay tax on int income, however int paid on loan is allowed as deduction u/s 57 as such int income is taxable as income from other source.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 November 2013 I dont think interest paid on this loan can be claimed as an expenditure under section 57. Under section 57, the expense incurred to earn the other income is allowed as an expense. In this case, you already are earning an income against which you have taken a loan. So there is no nexus between the expense incurred and income earned.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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30 November 2013 In case if int is paid on loan taken for earning taxable income then sec 57 is invokable...pls refer sec 57 carefully.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 November 2013 I totally agree tushar bhai. I have read section 57 several times carefully. So thanks for the suggestion. You, yourself are saying that if interest is paid to earn taxable income, deduction should be allowed.

But in this case expense has not been incurred to earn taxable income. The income was already there. You have taken a loan against it to use funds elsewhere.

To say that you have made expense to earn income, you should have had the reverse position.

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