Deduction for interest paid.

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T T Parwani

Others

86 Points Joined January 2015

My business income is 5 lakh, interest income 3 lakh. I have paid 2 lakh interest on my liabilities. What shall be my taxable income.
5+3-2= 6
or
5+3-75%of 2 = 6. 5 lakh.
which is correct.

Replies (2)

As per 57(iii), any expenditure not being a capital expenditure which was incurred wholly and exclusively for the purpose of earning such income is deductible from the income earned.But you have to prove that the loans on which interest is earned are the same loans on which interest is paid.