Pre-Construction Interest-PCP and Interest on Borrowed Capital

Interest on Borrowed Capital - Deduction under Section 24(b) for Income from House Property

 For different types of houses

A. Let-Out Property/Deemed to be let out

 For a let-out property, there is no upper limit 

B.Self-Occupied Property: 

Restricted to Rs.30, 000 if loan was taken before 1-4-1999.

Rs. 2, 00,000 if loan was taken after  1-4-1999

Format

Interest on Borrowed Capital

For the Current P.Y.2024-25

Pre Construction Interest(1/5 of XXX)

 

XXX

XXX

 

XXX

 How to calculate pre-Construction Interest

            Pre construction period X interest per Year= XXX

Pre-construction period:

        i.            If Date of completion is earlier

PCP= Date of Loan to proceeding 31st March.

      ii.            If the Date of Repayment is Earlier

PCP= Date of Loan to Date of repayment

Problem:1  INTEREST ON BORROWED CAPITAL:

Mr.Srinivasan took a loan of Rs.4,00,000 on 1-4-2021 at 20% p.a. to construct a house. The construction of the house was completed on 1-11-2023. Compute the amount of interest deductible in computing the income from house property, if the house is let out and load not repaid yet during 2024-2025.

Solution

Given:

Date of borrowing: 01-04-2021

Date of Completion: 1-11-2023

Date of Repayment: Not yet

Here Completion comes earlier and

 Pre-construction Period= 01-04-2021 to 31-03-2023= 2 years

Interest on Borrowed Capital :

Interest on Borrowed Capital

For the Current P.Y.2024-25 – 4,00,000x20/100

Pre Construction Interest(1/5 of XXX)

80,000x2= Rs.1,60,000 (1,60,000/5)

 

80,000

 

32,000

 

1,12,000

  

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