Sec 24 and capital gain
This query is : Resolved
10 September 2017
Interest on housing loan, once i claimed deduction U/s 24 and same time i capitalized( added in cost of flat ) it the books of accounts . can i claim that interest as cost of improvement while computing capital gain ? in other words can claim deduction U/s 24 and under head capital gain same time ?
10 September 2017
No. Interest payments on housing loan cannot consider as cost of improvement and not eligible for deduction to computation of capital gain, more than that any expenditure or deduction allowed under Income from house property is not eligible for deduction in computation of capital gain
10 September 2017
I second Ramesh Krishnan ji. Interest on home loan does not in any way increases the value of the house and therefore cannot be considered as Cost of improvement
11 September 2017
ITAT has taken a contrary view in ACIT v. C. Ramabrahmam (2013) 57 SOT 130 (Chennai)(Trib).
16 September 2017
What is final conclusion of the case ACIT v. C. Ramabrahmam (2013) 57 SOT 130 (Chennai)(Trib) ?
In Income Tax there are provisions which allows double taxation , then why not there should be double deduction under different sections ?
In Income Tax there are provisions which allows double taxation , then why not there should be double deduction under different sections ?
23 July 2025
Great question! The issue of claiming **interest on housing loan** both as **deduction under Section 24** (income from house property) **and as cost of improvement under capital gains** has been debated quite a bit.
---
## What the experts say (usual position):
* **Interest under Section 24(b)** is allowed as a deduction against **income from house property**.
* **Capital gains** calculation allows deduction of **cost of acquisition** and **cost of improvement**.
* Generally, **interest on housing loan is not allowed as cost of improvement** because:
* It is considered a **revenue expenditure** (interest), not a **capital expenditure**.
* It does **not increase the value of the property** in the sense intended by capital gains provisions.
* Allowing it as cost of improvement would be **double benefit** since it is already deductible under Section 24.
---
## ITAT Chennai decision in **ACIT v. C. Ramabrahmam (2013) 57 SOT 130 (Chennai)**
* The tribunal allowed the interest on housing loan as part of **cost of improvement** for computing capital gains.
* The reasoning was that **interest capitalized (added to cost in books)** represents **capital expenditure**.
* Therefore, it could be claimed as **cost of improvement** and also claimed as deduction under Section 24.
---
## What is the final conclusion or practical stand?
* **The legal position is not very settled.**
* Some tribunals have accepted the ITAT Chennai view if interest is **actually capitalized and added to cost in books**.
* But the **CBDT and most assessing officers** generally **disallow double claim**, citing:
* Interest under Section 24 is for income computation.
* Cost of improvement is capital expenditure.
* Interest is revenue in nature, not capital.
* Courts may differ on facts (whether interest was actually capitalized or just paid), and whether capitalized interest qualifies as capital expenditure.
---
## Your key takeaways:
| Aspect | Position |
| ------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |
| Interest under Section 24 | Deductible from income from house property |
| Interest as cost of improvement | Generally disallowed, but ITAT Chennai allowed it if capitalized |
| Double deduction | Usually disallowed by assessing officers |
| Practical advice | Claim interest under Sec 24; if capitalized in books, consider claiming as cost of improvement but be ready for scrutiny |
---
## Why the difference?
* Capital gains provisions are strict about **what constitutes cost of improvement**.
* Interest is often considered a **revenue expense** unless properly **capitalized**.
* The **ITAT’s view** is fact-specific, focusing on **accounting treatment**.
---
If you want, I can help you draft submissions citing this case or provide arguments to defend either claim based on your facts.
---
Would you like me to help with that?
---
## What the experts say (usual position):
* **Interest under Section 24(b)** is allowed as a deduction against **income from house property**.
* **Capital gains** calculation allows deduction of **cost of acquisition** and **cost of improvement**.
* Generally, **interest on housing loan is not allowed as cost of improvement** because:
* It is considered a **revenue expenditure** (interest), not a **capital expenditure**.
* It does **not increase the value of the property** in the sense intended by capital gains provisions.
* Allowing it as cost of improvement would be **double benefit** since it is already deductible under Section 24.
---
## ITAT Chennai decision in **ACIT v. C. Ramabrahmam (2013) 57 SOT 130 (Chennai)**
* The tribunal allowed the interest on housing loan as part of **cost of improvement** for computing capital gains.
* The reasoning was that **interest capitalized (added to cost in books)** represents **capital expenditure**.
* Therefore, it could be claimed as **cost of improvement** and also claimed as deduction under Section 24.
---
## What is the final conclusion or practical stand?
* **The legal position is not very settled.**
* Some tribunals have accepted the ITAT Chennai view if interest is **actually capitalized and added to cost in books**.
* But the **CBDT and most assessing officers** generally **disallow double claim**, citing:
* Interest under Section 24 is for income computation.
* Cost of improvement is capital expenditure.
* Interest is revenue in nature, not capital.
* Courts may differ on facts (whether interest was actually capitalized or just paid), and whether capitalized interest qualifies as capital expenditure.
---
## Your key takeaways:
| Aspect | Position |
| ------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |
| Interest under Section 24 | Deductible from income from house property |
| Interest as cost of improvement | Generally disallowed, but ITAT Chennai allowed it if capitalized |
| Double deduction | Usually disallowed by assessing officers |
| Practical advice | Claim interest under Sec 24; if capitalized in books, consider claiming as cost of improvement but be ready for scrutiny |
---
## Why the difference?
* Capital gains provisions are strict about **what constitutes cost of improvement**.
* Interest is often considered a **revenue expense** unless properly **capitalized**.
* The **ITAT’s view** is fact-specific, focusing on **accounting treatment**.
---
If you want, I can help you draft submissions citing this case or provide arguments to defend either claim based on your facts.
---
Would you like me to help with that?
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