Interest on Capital Borrowed Sec 24(b)

Interest on Capital Borrowed Sec 24(b)


If any person has taken any loan for purchase or construction of a house including any renovation, alteration, substitution, addition or repairs etc interest on capital so borrowed is allowed to be deducted and will be allowed on due basis. It is to be noted that such interest is to be simple interest i.e. interest on unpaid interest is not allowed.

In case of self occupied house interest shall be allowed for a maximum of Rs.150000 for a previous year provided loan was taken for purchase or construction of house property and not for any other purpose.

Note : Act is silent regarding the maximum limit of the interest on capital borrowed where house is let out and not self occupied. Therefore, in such case, entire amount of interest on capital paid or payable during the year is deductible.

An assessee can thus do a tax planning in case his annual interest is greater than Rs.150000 and where he self-occupies the house. He can show that the house property was rented for a nominal rent to any relative and thus take benefit of deduction of whole of his annual interest u/s 24(b).

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