Wednesday, October 17, 2012

Salary :- Deduction of Interest on Loan for House Property

Section 24(b) of the Act allows deduction from income from house property on interest on borrowed capital as under:-
(i)  the deduction is allowed only in case of house property which is owned and in the occupation of the employee for his own residence. However, if it is not actually occupied by the employee in view of his place of the employment being at other place, his residence in that other place should not be in a building belonging to him.
(ii)  The quantum of deduction allowed as per table below:
Sl. No
Purpose of borrowing capital
Date of borrowing capital
Maximum Deduction allowable
Repair or renewal or reconstruction of the house
Any time
Rs. 30,000/-
Acquisition or construction of the house
Before 01.04.1999
Rs. 30,000/-
Acquisition or construction of the house
On or after 01.04.1999
Rs. 1,50,000/-
In case of Serial No. 3 above
(a)  The house so acquired or constructed should be completed within3 years from the end of the FY in which the capital was borrowed. Hence it is necessary for the DDO to have the completion certificate of the house property against which deduction is claimed either from the builder or through self-declaration from the employee.
(b)  Further any prior period interest for the FYs up to the FY in which the property was acquired and constructed shall be deducted in equal instalments for the FY in question and subsequent four FYs.
(c)  The employee has to furnish before the DDO a certificate from the person to whom any interest is payable on the borrowed capital specifying the amount of interest payable. In case a new loan is taken to repay the earlier loan, then the certificate should also show the comprehensive picture of Principal and Interest of the loan so repaid.

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