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Interest on Loan

Kiran Shinde (Accountant) (46 Points)

02 July 2010

Dear All,

If an individual is only having income from Interest on Fixed Deposit, Dividend Income from Investment in Shares. He has taken a Loan against the pledge of Fixed Deposit from the same Bank.

Please let me know whether Interest paid on loan agaisnt mortgage of FD is allowed under Income Tax or Not?

thanks & regards

Kiran

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3 Replies

CA Amit Kanani (Practicing CA) (338 Points)
Replied 02 July 2010

Not at all. It will not allowed. Divindend income is exempt so no exp. allowed against that income.

and interest shall also not allowed against interest on FD.

Under Income Tax Act, only those exp. allowed against income which r incurred to earn that income. So, if take loan and make FD of that then interest shall allowed but not in this case.

Here, u can claim interest against income u earn from using Loan.

PRATEEK (ACA) (102 Points)
Replied 02 July 2010

NO DEDUCTION WOULD BE ALLOWED U/S 57 AS YOU CANNOT CLAIM DEDUCTION OF EXPENSE WHICH RESULTS INTO EXEMPTED INCOME BUT IF THE DIVIDEND U/S 2(22)e HAS BEEN RECIEVED THEN YOU CAN CLAIM DEDUCTION U/S 57