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Income tax

Rajat kumar Bandyopadhyay (Manager BOI) (24 Points)

20 March 2016

Can interest on loan against FDR be offset against interest income on same FDR for calculating taxable income

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9 Replies

CA Chandra Prakash (9873059766 Increasing knowledge through sharing) (296 Points)
Replied 20 March 2016

NO, it is not allowed in income tax law.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 20 March 2016

Agree with Chander, Any expenditure incurred to earn particular income can be claimed as expenditure for Income tax purpose. In your case, Interest paid by you on loan against F.D.R is not for earning Interest income on F.D.R hence can not be allowed against Interest income on F.D.R. But if such loan is taken for business purpose then it can be claimed as Business expense

rohit mundra (ca, cs, b.com) (70 Points)
Replied 20 March 2016

No expenses are allowed in head income from other source

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 20 March 2016

There are two sections(Sec-57&58) which elborate Admissible and Inadmissible expenditures which are available as deductions for computing Income from other sources. Under section 57, it is specified that "Any other expenditure (Other than Capital expenditure) wholly and exclusively incurred to earn such income" is allowed as deduction against Income from other sources except in cases specified u/s.58 which include Personal expenses, Wealth tax, Expenses of nature disallowed u/s.40A and expenses in connection with winnings from Lotteries, Crossword Puzzles, Races, Gambling or Betting. Therefore except expenses specified u/s.58 each and every expenditure having direct connection to earn such income is fully allowed u/s.57

manoj (student) (5205 Points)
Replied 20 March 2016

No you cant get benefit of set off

As per Income tax Act it is other source income

and interest paid by you is definately used for some specific purpose so you cant get benifit of set off

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Max Payne (employed) (2574 Points)
Replied 20 March 2016

Rajat, if you have a loan taken for business, CLAIM INTEREST as an expense u/s 36,subject to TDS provisions, sections 40A and 43B.

If you have FDR interest income and interest on loan payable, ordinarily it cannot be set off while calculating IFOS. However, as pointed out by Swami Ayyappa Nulli, section 57 provides deduction for expenses INCURRED TO EARN IFOS. If loan had been taken for the purpose of putting in FD, you could claim that interest on loan as expense for earning FDR interest income. Since in the present case there is loan was taken against FD and NOT FOR CREATING A SOURCE FD, no deduction available.

Summary: in IFOS, loan against FD no deduction for interest. But loan for FD, deduction is allowed.

Vijay Goyal (Director) (41 Points)
Replied 20 March 2016

This need to be clearify. In fact all the Person are takening loan against FD to earn interest on FD . The purpose to taking loan is to earn interest . If their is lacuna in law it should be clearify by the income tax deparment in the interest. Of depositors. Otherwise our banks are in trouble no one will deposit as fix Deposit. Govt have also intervieen in the matter