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Deductions from Capital Gain

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CA Pratik Dhruve

321 Points Posted on 30 January 2024

Capital gain query:

Mr. A has a Fixed deposit of Rs. 10 lac @ 6.3% interest.

Interest income of Rs. 63000 is shown under Income from other sources.

Mr. A took an Overdraft of 9 Lacs against this FD @ 7.3%. (Paid interest of Rs. 65,700)

Invested 9 Lacs in equity shares.

Earned Short term capital gain of Rs. 1 Lac.

Can interest paid of Rs. 65,700 be claimed as a deduction from Capital gain Income?

Replies (2)

Quick Summary

This discussion explores whether interest paid on an overdraft, taken against a fixed deposit and used to invest in equity shares, can be deducted from short-term capital gains. The consensus is that this deduction is generally not allowed for capital gains tax purposes when filing ITR 2. However, if the activity is considered business income and filed under ITR 3, such deductions might be permissible.