Interest on borrowed capital for self occupied property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 September 2011 A individual has taken a bank loan for accuring housing property. The property has been registered in the name of the wife of the said individual and no share of property is in the name of the individual. Kindly advise whether, interest payable/repayment of borrowed capital could be deducted as rebate of income tax. If no deduction will be allowed kindly advise the rule so that the individual could be intimated accordingly.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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27 September 2011 Kindly explain the query. The property is in the name of the assessee but no share is in the name of the assessee.

Not able to understand. Kindly clarify

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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01 August 2024 Under the Income Tax Act in India, the deduction of interest on a housing loan is subject to specific conditions, especially when the property is self-occupied. Here's how the rules apply in your scenario:

### **Interest Deduction for Self-Occupied Property**

1. **Ownership and Deduction Eligibility**:
- **Ownership Requirement**: For claiming a deduction under Section 24(b) for interest on a housing loan, the taxpayer must be the owner of the property. The deduction is available to the person who has taken the loan, provided they own the property.
- **Property in Spouse's Name**: If the property is registered in the name of the wife and the individual is not a co-owner, the individual cannot claim the deduction on the interest paid on the loan. The deduction can only be claimed by the legal owner of the property.

2. **Relevant Section**:
- **Section 24(b)** of the Income Tax Act: Allows a deduction of up to ₹2 lakh per annum for interest on a home loan for a self-occupied property. However, this deduction is available only if the individual is the owner of the property.

### **Key Points to Note**:

- **No Deduction for Non-Owner**: Since the property is in the wife’s name and the individual is not a co-owner, the individual cannot claim any interest deduction for a property in which they are not an owner.
- **Spouse's Claim**: If the wife is the legal owner of the property, she is eligible to claim the interest deduction under Section 24(b) for the loan taken, provided the loan is in her name or she is the co-borrower.

### **Rules and Sections**:

- **Section 24(b)**: Provides for the deduction of interest on a home loan for a self-occupied property, but the benefit is available to the owner or co-owner of the property.
- **Section 10(13A)**: Pertains to the exemption of house rent allowance (HRA) but is not relevant to interest on home loans.

### **Summary**:

Since the individual is not the owner of the property, they cannot claim the deduction for interest on the home loan under Section 24(b). The deduction for interest on a housing loan is exclusively for the owner of the property or a co-owner. Therefore, the individual should inform their spouse about the eligibility to claim this deduction, if applicable, for her as the property owner.

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