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Interest on Borrowed Capital from Friends & Relatives

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(Querist)
21 June 2010 Please clarify Interest & Principle on Borrowed Capital from Friends & Relatives are eligible to take exemption U/s 24 & U/s 80C
If allowed what is the proof we have to submit to the IT Authority.

Thanks in advance
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CMA Ramesh Krishnan

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CMA Ramesh Krishnan (Expert)
21 June 2010 Interest payment to friends and relatives can be claimed u/s 24 but only against a certificate received from them. In the absence of the certificate, you would not be eligible for the deduction. The recipient of interest income who issues the certificate is liable to pay tax on the interest income that he receives. As far as the principal payments are concerned, they would not qualify for tax benefit as loans only from notified institutions and banks are eligible for such deductions
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