How to treat joint bank loan in income tax file

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This query is : Resolved

Mahabir Prasad Agarwal (Querist)

22 February 2017 Mr. A & B are joint owners of a ancestral land. A loan of 12.00 lac was taken from a bank jointly for construction of bank building and the said building was leased to bank on a monthly rent of Rs.12,000/- p.m. which is deposited directly by the bank into a joint Saving bank a/c of A & B. And from this said SB a/c, loan EMI is paid.

Now, how to reflect the above in Income tax File of A & B ?

CA Hariprasad Nayak

CA Hariprasad Nayak (Expert)

22 February 2017 Hi Mahabir,

Rental income can be equally divided among Mr. A and Mr. B in their individual capacity. Rental income to be treated as Income from House property. Std deduction of 30% is available. Further, interest on loan taken for construction can be claimed equally among A and B under section 24 of the Income tax Act.

Option 2 is you may treat this as a property of the HUF and treat this income as belonging to the HUF. For this to happen, you need to have a separate PAN for HUF and also a separate bank account for HUF. Any income from HUF is exempt in the hands of the members.

However, analysing your situation, rental income is Rs 1.44 Lakhs for the year. Assuming interest of around Rs 1.20 Lakhs PA and also considering 30% standard deduction, you end up in a loss which is available for set off against any other income you might have earned during the year. Therefore, it is beneficial for you to offer in hands of A and B as joint owners rather than having a HUF created for this purpose.

Any suggestions from other experts is welcomed

Regards,

CA Hariprasad Nayak
+91 9481 227 467

Mahabir Prasad Agarwal

Mahabir Prasad Agarwal (Querist)

23 February 2017 Many many thanks for your prompt and logical reply.

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