Pre Construction Interest Deduction

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This discussion clarifies whether interest paid on loans during the construction of a commercial complex can be deducted. While typically allowed for residential properties, the deductibility for commercial properties depends on how the income is classified. If the commercial complex income is treated as business income, pre-construction interest is generally not deductible under Section 24B. However, if treated as rental income from a house property, it may be deductible in five equal installments after completion.

Raj Chitroda

Raj Chitroda (Querist)
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14 December 2020 Dear Experts,

Mr. A Constructed & completed Commercial complex in three year by taken Term Loan from bank against the Property and Loan EMI started from the beginning of construction.

Now my question is that Mr A has paid Interest up to completion of construction of Commercial property is eligible deduction u/s 24B in five equal installments after the completion of Complex or pre construction deduction is only for Residential House Property ?

Does pre Construction Loan Interest eligible deduction against Commercial Property Rent Income ?

Thanks & Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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15 December 2020 Interest up to completion of construction of Commercial property is eligible deduction u/s 24B in five equal installments after the completion of Complex if rental income is shown as income from house property.

Raj Chitroda

Raj Chitroda (Querist)
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15 December 2020 Thanks for your valuable reply but sir my point is,
Deduction allowable only to Residential Property or Commercial Complex Property or both ? my consultant advise me that Pre Interest not eligible for Commercial Property it is true ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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16 December 2020 Yes, it's true if you show comercial complex income under business.

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