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Interest on Borrowed Capital (House Property)

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V.VINOD KUMAR

Executive - Accounts

24 Points Posted on 25 March 2011

Dear Friends,

1. Kindly confirm whether the interest borrowed from private persons or any other private non Banking financial institutions for purchase of Plot and construction of House property is eligible for Deduction U/s 24 (b). if so quote me the notification/Circulars clarifying the same.

2. Whether Amount Borrowed by way of Mortgage loan from a private housing finance company towards purchase of plot is eligible for Deduction U/s 24(b). (House is to be constructed in near furture in the plot),

Thanks in advance.

Vinod

Replies (1)

Maheshkumar Sharma

134 Points Posted on 25 March 2011

Yes. Interest on capital borrowed for the aforsaid purpose is allowed as ded. on accrual basis. It can be borrowed from any person. But it should be kept in mind that the assessee should get a cerificate from the lender to the effect that loan is taken, and bifercate the amt in principal and Interest portion. It is a practical situation.

The word used is property and not House property. So even loan taken for the purpose of Plot is also eligible. Keep in mind the provisons of Capital gain regarding 1 year and 3 years period under section 54 and 54 F and pre-construction period interest.