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interest on mortgage loan - income tax claim

n chellappa (DGM-Finance) (24 Points)

25 May 2010  

Dear All

I have an interesting query from my collegue. He has constructed a secondary housing from his own funds and he has let out the property. After few years, now he has taken the loan from the bank by mortgaging the secondary house. Now he wants to claim the interest on this loan under Income from house property clause. He is not mentioned the reason for the mortgage loan and not used it for it's constrution acivities.

 

kindly advise whether he can deduct this interest under "Income from House Properties"

chellappa


 7 Replies

Shudhanshu Agrawal (Business) (2570 Points)
Replied 25 May 2010

Originally posted by : n chellappa

Dear All

I have an interesting query from my collegue. He has constructed a secondary housing from his own funds and he has let out the property. After few years, now he has taken the loan from the bank by mortgaging the secondary house. Now he wants to claim the interest on this loan under Income from house property clause. He is not mentioned the reason for the mortgage loan and not used it for it's constrution acivities.

 

kindly advise whether he can deduct this interest under "Income from House Properties"

chellappa

 According to me he will be allowed expense of interest but that will be allowed from the source for which he has used the loan amount and not from House Property. He is doing a kind of fraud if he does so.

Rachit (Analyst) (908 Points)
Replied 25 May 2010

Since the mortgaged loan has not  been used for purchase or construction of house property, interest on the same will not be allowed as a deduction u/s.24.

If he has used the loan for business purposes then he can avail this interest expense deduction from his business income

A.K.CHATURVEDI (SERVICE) (84 Points)
Replied 25 May 2010

hi,

he can not claim interest as deduction under the head income from house property, he can claim deduction only from the income for which such loan used 

C.Balaji (Learner) (1862 Points)
Replied 25 May 2010

Agree with all......

Since the Loan was not used for purchase or construction of house property, interest will not be allowed as deduction u/s.24.

harish sharma (student) (58 Points)
Replied 26 May 2010

section 24(b) gives deduction of interest only when it is on money borrowed for construction purchese 

repair renovation of house proprerty

since ur friend has already constructed a house using his own fund and mortgage  loan is not used for aforsaid purposes hence he can not claim interest as deduction. 

Jagdish Bhalia (Practicing CA) (453 Points)
Replied 26 May 2010

In the assessment he cannot prove that the Loan was for construction activity. He cannot cliamed interest as a deduction u/s 24.

If he do so and his case selected for scruitiny than along with disallowance of interest , he would be liable for concealment penalty u/s 271 (1) (c) for furnishing inaccurate particulars.

1 Like

Atul Kumar (working employee) (153 Points)
Replied 26 May 2010

all making good reply that interest on loan are allowed for deduction u/s 24 when such loan has use for the purpose of construction/repair of house. if he taken a loan for repair of such house then deduction allowed otherwise not


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