gagan (Technical Lead) (47 Points)
07 February 2014Hi, I had paid ~7000INR as processing charges for the home loan from ICICI Bank. I heard that I can claim this processing charges under section 24c where home loan interest repayment is claimed. Is it correct?
Can you please tell the income tax section where it is specified?
With regards
Gagan Gupta
Mihir
(Wealth Manager)
(5293 Points)
Replied 08 February 2014
I don't think processing charges are eligible for deduction u/s 24.
Wait for more replies.
RAKESH SAH
(Senior Executive (Finance & Account))
(115 Points)
Replied 08 February 2014
No, you can't claim.
PARV
(TAX ASSISTANT.)
(202 Points)
Replied 08 February 2014
Under sec-80C, THere is provision that Stamp Duty, Registration fees and other expenses for the pupose of transfer of such house property to the assesse is allowable as deduction for the cost of purchase/construction of new residential house property.
Rohit Gupta
(Audit Executive)
(271 Points)
Replied 08 February 2014
Dear Gagan,
As Per Section 24(b) of Income Tax Act, 1961 interest on loan taken for the purpose of acqusition of Home is eligible for deduction. However it is not mentioned anywhere that the prccessing fees for the purpose of taking such loan is also allowed as deduction.
For the purpose of taking deduction on interest you have to furnish a certificate, from the Bank or Financial Institution, specifying the amount of interest payable by you for the purpose of such acquisition. The Bank at the time of giving such certificate will not write the amount of processing fees paid by u. So, the deduction of that will not be allowed.
There is no section in Income Tax Act naming Section 24(c).
PARV
(TAX ASSISTANT.)
(202 Points)
Replied 08 February 2014
Rohit G,
Then how section 80C tell about this.
If we prove that processing fees is paid, then we can claim the deduction as other expenses for transfer /construction / purchase of property.
Rohit Gupta
(Audit Executive)
(271 Points)
Replied 08 February 2014
Dear Parv,
The deduction of Stamp Duty, Registration fees and other expenses are not eligible for deduction u/s 80C. Only the repayment of principal amount of laon is allowed under Section 80C.
These expenses are allowed at the time of transfer of House Property and will be added in the Cost of Acquisition.
Rohit Gupta
Rohit Gupta
(Audit Executive)
(271 Points)
Replied 08 February 2014
Dear Parv,
As per Section 80C (xviii) deduction is allowed for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head "Income from house property" (or which would, if it had not been used for the assessee's own residence, have been chargeable to tax under that head), where such payments are made towards or by way of stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee.
Amount of loan processing fees is not in the nature of expenses for the purpose of transfer of such house property to the assessee. Such other expenses include clerkage and commision to prop. dealer, typing chg. etc.
PARV
(TAX ASSISTANT.)
(202 Points)
Replied 08 February 2014
ya right thank you sir,
I was consideing that the transfer take place but it is Q of loan taken & processing chgs
CA Neha Agrawal
(CA)
(825 Points)
Replied 08 February 2014
tax benefit cannot be claimed on processing fees paid for taking home loan. but for self employed person same can be claimed as business/ professional expense if he shows the Home Loan as liability in the Balance Sheet.
Deepak Gupta
(CA Student)
(15922 Points)
Replied 09 February 2014
Refer to the decision of ITAT Mumbai in case of, Pentagram Properties Private Limited vs. DCIT (Order attached below).
.
Relevant Extract:
.
> Section 24(b) allows deduction in respect of any interest payable on capital borrowed for the purpose of acquiring, constructing, repairing or renewing the property.
.
> Section 2(28A), defines "interest" as interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized.
.
> It is seen from the definition that even a service fee paid in respect of the moneys borrowed is included in the definition of "interest".
.
> The processing fee is charged by the lender since the processing of the loan application and connected documents involves a service rendered by him to the borrower.
.
> By virtue of the definition of the word "interest", the processing fee, which perhaps may not otherwise fall to be considered as interest, is to be treated as interest and allowed as a deduction under section 24(b) of the Act.
.
> If we may say, that with respect, the CIT(A) would appear to have lost sight of the fact that it is by definition of the word "interest" that the processing fee is to be treated as interest and the fact that the processing is done before the grant of the loan cannot be put against the assessee in the light of the definition.
.
> The assessee's contentions are also supported by the order of the Single Member, Pune Bench in the case of Chintamani Hatcheries (P) Ltd. vs. DCIT (2000) 75 ITD 116 (Pune) (SMC), where it has been held that processing fee for obtaining a loan is a service fee and has to be allowed as interest in view of the definition in section 2(28A).
.
> The Circular No. 202, dated 5th July 1976, issued by the CBDT while explaining the provisions of section 2(28A) also clarify the position.
.
> We therefore accept the assessee's claim based on section 2(28A) and direct the Assessing Officer to allow the processing fee of Rs. 55,00,000/- as deduction under section 24(b) while computing the property income. The appeal is allowed.
gagan
(Technical Lead)
(47 Points)
Replied 09 February 2014
Rohit Gupta
(Audit Executive)
(271 Points)
Replied 09 February 2014
Dear Neha,
It is not possible to claim the processing fees of Home Loan as business expenditure as u have taken the loan for the personal matter. It is immaterial whether u have shown it in your Balance Sheet or not. If u have taken the loan for business purpose only then u can claim the processing fees as business expenditure.
Rohit Gupta
RAKESH SAH
(Senior Executive (Finance & Account))
(115 Points)
Replied 10 February 2014
Yes, I aggree with Mr.Rohit Gupta.
Rakesh Sah
CAclubindia
