24(b) interest deduction include penal interest

This discussion clarifies whether penal interest is eligible for deduction under Section 24(b) of the Income Tax Act. The general consensus and legal interpretation suggest that while interest on borrowed capital for house property acquisition or construction is deductible, penal interest or interest in the nature of a penalty is not allowed. This means you cannot claim a tax deduction for late payment charges or similar penalties associated with your home loan.