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Interest on Income from House Property

Ritesh (Article Assisstant) (24 Points)

13 March 2009

There are three brothers having a paternal land at calicut ,Kerala. They want to develop it commercially. One portion of the land is for their guest house. Out of three brothers, one is staying in U.K. and the other two are residing in India. The brother who is residing in U.K. will take the loan and also one of the brothers in India can take the loan. Now question is whether the Interest on loan taken by the person in U.K. can be adjusted with the Income from House Property?

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Murali Krishna (Student) (27 Points)
Replied 30 March 2009

Interest on borrowed money , which is payable outside india and which is taxable in india in the hands of the recipient, shall not be allowed as a deduction u/s 24(b) , unless the tax on the same has been paid or deducted at source.

S.9 states that interest paid on loan borrowed by a resident from non resident for the purpose of applying the loan in india, then such interest paid is Indain Income, meaning taxable in the hands of the recipient.

But when a NR takes a loan from another NR and creates a Source of Income in India( the HP in this case), then interest on loan is only a foreign income.

So it depends upon the residential status of the brother in UK and wether Tax is deducted at source.