INTEREST PAID ON HOUSING LOAN

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J SREEKUMAR (Querist)
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14 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 is debited to his capital account.However,both the loans are serviced through his business account. What would be the effect on profit/NW of the concern if the interest paid on housing loan is debited to P&l Account? Is it correct to debit the interest on HL to Capital Account?

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)
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14 August 2009 Yes. At present you are following the correct treatment. Housing loan interest expenses are of personal nature and hence has to be debited to capital account instead of P&L Account.

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