3.7.1 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 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 |
| 1 | Repair or renewal or reconstruction of the house | Any time | Rs. 30,000/- |
| 2 | Acquisition or construction of the house | Before 01.04.1999 | Rs. 30,000/- |
| 3 | 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.
