Land loan income tax benefit query

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B S

vssv

25 Points Posted on 22 February 2015

Hi,

Please look at following link:

https://businesstoday.intoday.in/sto...-between-buying-plot-or-a-house/1/190084.H T M L

In the above article, it is said that

"The interest paid on any loan for purchase of land which is vacant shall not qualify for tax deduction. However, if the plot is rented out, irrespective of whether the rental income is offered for taxation as 'business income' or 'income from other sources', the interest paid on any loan used to buy the plot can be availed of as deduction. There will be no tax benefit for repayment of the principal of such loans,"

Please clarify this as many articles on internet claims that no tax exemption is allowed on land loan alone.

Can you really claim interest part as tax benefit ? and if yes, then please state the relevant provision/section of income tax rules.

Thanks in advance.

Replies (3)

Swami Ayyappa Nuli

TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH

997 Points Posted on 22 February 2015

If your business itself is acquiring Vacant lands and let out for Rent, it is taxable under the head "Income from Business or Profession" and if it is not your main business, then those rental Income taxable under the head "Income from other sources". In both cases, you can claim Interest on Loan taken for purchase of vacant land. Note: You should capitalise Interest paid up to Asset used for Renting and you can claim it in form of Depreciation if it is your business Income and it is Income from other sources, Depreciation is not at all allowed.