Deduction over interest paid to parents on Housing loan

You can rely on Sec 24(b) of the Income Tax Act,1961 which provides for deduction from "Income from house property" where interest is paid for the purpose of acquisition, construction, repairs, renewal or reconstruction. The category of the recipient of interest is not relevant for the purpose of claiming deduction u/s 24(b).Even if your employer is not allowing the deduction of the interest, you can claim the same as deduction in the return of income to be filed by you. In case your employer files your return, you can ask him to file the return individually by yourself.

agreed with Yogi. 

Your employers are not justified in acting so. It is not their internal policy which matters but the Income Tax Act, 1961. They should not be bothered unless they bear the interest payments! I think your query is w.r.t TDS made by your employers, they may not consider the same as valid deduction. No problem, you can claim the same provided all conditions are satisfied under section 24. File the return yourself after considering TDS deducted and ineterest payment made by you. 

Yogi,

Thanks for your reply.

I am just paying interest on cash basis ,there is no bank entry for the same will IT people will question this while giving me this deduction.

Thanks @ Yogi and Sunny,

I know there is alternate route to claim deduction by filing a Income tax return but my company's stand of not giving me the deduction while deducting TDS is legally incorrect.I hahve to file a return and wait for the refund.

Waiting for refund is not  much of concern but the concern is that there is no bank entry for the interest payment everything is in cash.

But as the interest payment is  INR 1,20,000 paying to Father and Mother in ratio 65:35.So what I feel there should not be any issue as monthly payment does not cross INR 20,000 to each monthly.Please advice am I correct while making payment to them in cash.

Thanks in advance.

Since the interest payment is 1.20 lacs, the loan would be definitely more than 20,000 and therefore repayment in cash would attract a penalty equal to the amount repaid u/s 269T of IT Act, 1961.

 Why should cash payments be an issue? That too above 20000?  As far as your parents offer that income in their books, there should not be any issue. If there is no bank entry, create a valid proof so that it will be easy to convince the tax authorities. 

Section 269T is applicable in case of return of loan amount together with interest if any, if it exceeds Rs 20,000/-, in above case it is only interest. 

@ kapil, payment of cash will not be a concern at all. Make a voucher for payment bearing a revenue stamp which should be signed by the recipient. This proof shall be enough.

@ sunny, i dont think we should stretch the issue upto Sec 269T, i know there is a contravention of 269T, but Tax Audit u/s 44AB shall not be applicable in Kapil's case from the looks of things and hence no disclosure as such would be required.

Ya i too feel the same, but initially i did not raise 2699SS & T issue, was replying to other member. I agree with you. However, even if 44AB is not applicable in this case, transactions seem to be covered under 269SS if he has taken loan in cash, and kapil has to make sure that repayment of loan should be made by account payee cheque/draft to avoid any litigation. 

Considering the number of decided cases under 269SS and T, assessee has enough cover, provided, transactions are bona fide, as we all know mere technical default in complying under those sections, shall not be a strong ground for AO to impose penalty u/s 271D/E, etc.. 

Provision of Section 269SS and T would be applicable even though u r covered by Section 44AB or not. Since in the case of assessee covered by Sec 44AB, disclosure required as per FORM 3CD for the contravention of 269SS and 269T. Since in the given case, even if the tax audit not applicable, provision of section 269SS and 269T would still be applicable and hence, if the repaymentis made in form other than account payee cheque or bank draft, it would be clear voilation of section 269SS and 269T. eventually, if scrutiny comes and if AO asks for details, he would definately would levy penalty u/s 271D/E.

So its better to have repayment should made in account payee cheque/ Bank draft.

Regards

Manoj

Yes Yogi is Right iam agree with him dont worry kapil yu can claim and no company can deny yu from getting deduction of interest.