treatment of interest on borrowed capital for house property

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  1. vanita2986

    vanita2986 New Member

    pls somebody suggest. The possession of house property was delivered in dec 2015. the loan for the said property was taken in nov 2011. my query is whether the pre construction interest will be aggregated upto FY 2014-15 only? the other confusion is: from FY 2016-17, the time limit for getting the deduction for post construction interest has been increased from 3 years to 5 years (for getting possession of property from the date of obtaining loan). in this case, the amount of post construction tax deduction will be 30,000 or 2 lakhs for FY 2015-16? in case it is 30,000 for this year, what will be the amount of deduction for the next year?
  2. ZED

    ZED Well-Known Member

    Yes, the aggregated amount shall be allowed in 5 equal installments.

    Since in your case the construction was not completed within 3 years from the date of borrowing the money, you are not entitled to deduction higher than 30,000.
    However, if you can let out this property then higher deduction is available u/s 24(b).
  3. vanita2986

    vanita2986 New Member

    thanks for your quick response. pre construction plus post construction aggregated will be limited to Rs. 30000 only? actually some websites state that pre construction interest can be claimed without any limit in any case, so thats the only confusion left..
  4. ZED

    ZED Well-Known Member

    In your case , since the construction was not completed within 3 years from the date of sanctioning of loan, the deduction on account of interest shall be restricted to 30,000 per year. However, if you let out this property then you may claim full deduction of the interest (in the manner as prescribed earlier)

    I request you to kindly go through the provision once for more clarity.

    24. Income chargeable under the head "Income from house property" shall be computed after making the following deductions, namely:—

    (a) a sum equal to thirty per cent of the annual value;

    (b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:

    Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :

    Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed within *three years from the end of the financial year in which capital was borrowed, the amount of deduction under this clause shall not exceed two lakh rupees.

    * five if the loan was sanctioned in F.Y beginning from 2016

    Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:

    Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.

    Explanation.—For the purposes of this proviso, the expression "new loan" means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.
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