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Int on Loan borrowed for personal assets

This query is : Resolved

Vivek Randad (Querist)
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24 August 2009 My friend is running a soleproprietorship concern for the past4 yrs. he has availed OD for the business purpose & housing loan for his aquiring a house. The interest on OD is debited to p&l account under finance charges & interest paid on housing loan Rs. 10lacs is debited to his capital account. Now he wants to reverse the interest portion debited to capital a/c by debiting/capitalizing house building. Is this correct treatment,Also is this int considered as cost of acquisition at the time of transfer of Building

chetan soni

chetan soni (Expert)
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24 August 2009 No you can not add this interest to assets. If you still wish to add this interest, then you need to reverse all the benefits claimed u/s 24(b) in your earlier income tax returns. Show this by way of income under the head house property.

Your friend wish to do so to reduce the capital gains tax liability. right ?

If this is the case then you can instead add cost of improvement to reduce the liability.

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