Condition for claiming deduction of interest on loan against income from house properrty

Conditions for Claim of Deduction of Interest on Borrowed Capital for Computation of Income From House Property [Section 24(b)]:

Section 24(b) of the Act allows deduction from income from houses property on interest on borrowed capital as under:-

(i) the deduction is allowed only in case of house property which is owned and is in the occupation of the employee for his own residence. However, if it is actually not 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:

Purpose of borrowing capital

Date of borrowing capital

Maximum Deduction allowable

Repair or renewal or reconstruction of the house

Anytime
30000.00
Acquisition or construction of the house

Before 01.04.1999

30000.00
Acquisition or construction of the house

On or after 01.04.1999

Rs. 1,50,000/-
(upto AY 2014-15)

Rs. 2,00,000/-
(w. e. f. AY 2015-16)


(a) The acquisition or construction of the house 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 upto the FY in which the property was acquired or constructed (as reduced by any part of interest allowed as deduction under any other section of the Act) shall be deducted in equal installments 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 details of Principal and Interest of the loan so repaid.

Adjustment for Excess or Shortfall of Deduction:
The provisions of Section 192(3) allow the deductor to make adjustments for any excess or shortfall in the deduction of tax already made during the financial year, in subsequent deductions for that employee within that financial year itself.

Salary Paid in Foreign Currency:
For the purposes of deduction of tax on salary payable in foreign currency, the value in rupees of such salary shall be calculated at the “Telegraphic transfer buying rate” of such currency as on the date on which tax is required to be deducted at source ( see Rule 26).
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