Interest on borrowed capital is allowed as deduction under section 24(b)

Interest on borrowed capital is allowed as deduction under section 24(b)

If any assessee has taken a loan or advance for purchase/ construction / renovation / addition / alteration / substitution or repair etc. of the house property, interest on such loan shall be allowed to be deducted under section 24(b) from NAV and interest is allowed on due basis but only simple interest is allowed i.e. interest on interest is not allowed.


The  assessee  can take any number of loan. Interest for the year for which income. is being computed shall be allowed in the same year and shall be called current period interest. Interest for the period prior to the year in which the house was purchased or. constructed shall be called prior  period  interest  and  such  interest  shall  be  allowed in 5 annual equal installments starting from the year in which the house was purchased or constructed.


E.g. If Mr. X had taken a loan of Rs.5,00,000 for construction of property on 01.1 0.2016 and interest is payable @ 10% p.a. and the construction was completed on 30.06.2017, in this case interest allowed
under section 24(b) shall be:

Interest for the year (01.04.2017 to 31.03.201 8) = 10% of Rs.5,00,000 = Rs.50,000

Prior period interest =10% of Rs.5,00,000 for 6 months (from 01.10.2016 to 31.03.2017)=Rs.25,000

Prior period interest to be allowed in 5 equal annual installments of Rs.5,000 from the year of completion of construction i.e. in this case, P.Y.2017-18.

Therefore, total interest deduction under section 24(b) 50,000 + 5000 = Rs.55,000.

If any assessee has taken a new loan to repay the original loan, in such cases interest for such new loan shall be allowed in the similar manner.


As per section 25 if loan is taken from outside India, in that case also interest is allowed but the person making payment of interest should deduct tax at source or the person receiving interest should have an agent in India.


Demo Classes of Tax by Prof. Vinit Sir: https://www.conceptonlineclasses.com/demovideos


Visit Website: https://www.conceptonlineclasses.com/

#Interestonborrowedcapital
Latest Blogs

Salary of a Qualified CMA

Salary of a Qualified CMA


Best Career Option After Class 12th

Best Career Option After Class 12th


Why to choose career in "CMA" ?

The Reasons to Choose a Career in "CMA"


What Is Balance ScoreCard

What Is Balance ScoreCard A balanced scorecard is a strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes. Balanced scorecards are used to measure and provide feedback to organizations. #BalanceScoreCard


Top Reviews

Introduction to Statistics for CA Foundation

Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics


Chapter X of Companies Act 2013

Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013


Relevant sections under the Companies Act, 2013 dealing with fraud and false statements

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448


What is Corporate Image

What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage


What is Energy Audit

What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit