LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Loan Reimbursement

Harsh (Software Developer) (24 Points)

17 May 2011

I am planning to buy a property with the help of bank loan. The loan procedure will take about 2 months and I am planning to pay full amount by getting fund from friends and relative for temporary period to get the ownership of the property. Once I have got the properly on my name, I will apply for the loan.

My question is, will that loan be considered as a housing loan and if yes then is the loan interest deductible in IT return. Please explain in detail becuase some of the lawyer suggested that the type of loan will get changed if you are planning to get loan on your own property in form of reimbursment.

I can elaborate more if required.

Thx in advance.

Harsh

harshparekh @ gmail.com

Reply
Follow
Share

6 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 17 May 2011

bank does not offer housing loan for repayment to relatives,

housing loan available only if bank will pay direct to builder/ developer.

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 17 May 2011

agree with above experts that banks not give loan for repayment of loan from relatives.

Ranjan Choudhury (Asst Mgr Commercial) (21 Points)
Replied 17 May 2011

As per Circular No. 28, dated 20.08.1969, where a fresh loan has been raised to repay the original loan if the second loan has really been used merely to repay the original loan and this fact is proved to the satisfaction of the Income Tax Officer, the interest paid on the second loan would also be allowed as a deduction.

But in your case the fist loan is a hand loan which may not be considered as loan by income tax dept. Hence it is advised to take bank loan and then acquire the property.

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 17 May 2011

i agree with ranjan, not only bank loan even any approved financial institution loan like lic housing loan etc... can get the benefit of Tax

Anil (Consultant) (21 Points)
Replied 07 December 2011

Thank you very much for the valuable information Mr. Ranjan.

My situation is somewhat similar to Harsh. In my case however, I will be repaying a loan taken by State Bank of India with another loan (in a different homeloan segment) by the same bank. The bank has the provision for reimbursing upto 75% of the money spent on buying the property (Sale consideration plus the registration charges) if you apply for a loan within 1 year of buying that property.

Since, my first loan is a loan by a Bank itself, will it be considered for availing tax benefits by the income tax department?

Thank you..

ALPESH KUMAR (SUPRITENDENT) (140 Points)
Replied 08 December 2011

In case of Anil, he will be entitled for the tax benefits in light of the circular No. 28 dated 20/08/1969 as explained by Ranjan. Only thing need to be considered is the purpose of loan should not be altered and it must be for housing purpose...