Housing Loan - Processing fees deductions

This query is : Resolved 

18 March 2008

Our employee has going to housing loan and loan sanctioned but EMI deducted from the month of April'08, but processing fees paid Rs.9500/- in the month of march'08.

for the a.y.2008-09 he can claim deduction of rs.9500/- in 80C

please sir, clarify this

pushpendra (Expert)
18 March 2008

No he can not claim deduction

R.V.RAO (Expert)
18 March 2008

ca sailesh has given the following info. on 80 c.
we find from that info. processing charges of housing loan is not an admissible deduction

Point No. xviii of Sec 80C provides as follows:

xviii) For the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head Income from house property (or which would, if it had not been used for the assessees own residence, have been chargeable to tax under that head), where such payments are made towards or by way of

(a) any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

(b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or

(c) repayment of the amount borrowed by the assessee from

(1) the Central Government or any State Government, or

(2) any bank, including a co-operative bank, or

(3) the Life Insurance Corporation, or

(4) the National Housing Bank, or

(5) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or

(6) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or

(7) the assessees employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or

(8) the assessees employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or

(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,

but shall not include any payment towards or by way of
(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

(B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

(C) any expenditure in respect of which deduction is allowable under the provisions of section 24;

K V Subba Rao (Expert)
18 March 2008

You may like to take note the following extracted from http://www.apnaloan.com/taxtips/home-loan-india/deductiononprocessingfee.html

"Section 2(28A) of the I-Tax Act defines interest to include “….. any service fee or other charge in respect of the monies borrowed or debt incurred….”. Therefore, the processing fee can be treated as interest and a deduction can be claimed accordingly."

So Processing fee can be claimed as part of Interest, after completion of construction but not u/s 80-C.

CA Saurabh Maheshwari (Expert)
18 March 2008


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