Deduction for interest and pricipal repayment on home loan

Tax queries 256 views 4 replies

CA Bijay Shrestha

Never Give up....No matter what....

858 Points Posted on 26 November 2016

Dear Friends,

Three co-owners (also co-applicants) took home loan (share of each co-owner may or may not be there) but entire EMI was paid only by one Co-owner from his own account. Now

1. Can all co-owners claim Interest & Principal Repayment deduction individually subject the limit provided in IT Act, in their IT Return?

2. Can only paying co-owner claim deduction ? if yes, he can claim full deduction or only to the extent of his share?

3. What happens in above situations if EMI is paid from Joint accounts but funded by only One Co-owner?

Please suggest.

(Plain reading of Section 24 says that deduction shall be allowed for interest payable on capital borrowed. It does not talk about actual payment and who actually paid.)

Replies (4)

Mohan

Audit Assisstant & Accounts Manager

489 Points Posted on 27 November 2016

Each co-owners sharebis required to be mentioned in their respective return of income provided their share of ownership is specifically menioned in agreement or loan is borrowed by all of them and paid in their ratio (provided they have MOU prepared and registered for their ratio of co-ownership). In such case if loan is repaid from single account then it would be advisable to pass JV in other co-owners account for reimbursement to payer and pay

Mohan

Audit Assisstant & Accounts Manager

489 Points Posted on 27 November 2016

Pay the same to payer and claim deduction in respective return.

CA Bijay Shrestha

Never Give up....No matter what....

858 Points Posted on 27 November 2016

Nowhere it is mentioned in the Act that Interest should be actually paid.

It is only mentioned that deduction shall be allowed for interest payable on capital borrowed.

So interest is deductible on accrual basis. So in my view all three are eligible to take deduction under section 24(b) irrespective of who paid interest because house is owned by all three and loan was also taken by all three.