Hi Mr Subramanian,
Of course, the interest on capital borrowed for purchase of flat
would be allowed to be set off against other income (in case the
flat isn't let out). Section 24 quite explicitly states this, unlike
Section 80C, which insists on the actual payment of instalment as
also that the loan should be obtained from certain specified
entities, before the instalment becomes eligible to be knocked off
out of your income.
The allowance of interest u/s 24, even if it's not actually turned
over to the lender was also established after the Allahabad High
Court ruling in the case of CIT vs Devendra Brothers & Co (200 ITR
146). The court held that interest on housing loan whether paid or
not would be a permissible deduction in terms of section 24 of the
As to how long can you go on like this, I guess as long as the HUF
keeps showing the interest as its interest income year to year,
there is no limitation as such, by which the liability has got to be
liquidated. But it would be advisable to actually clear the amount,
particularly in view of the fact that the loan is from a close
associate of the assessee.
CA Sanjeev Bedi
--- In ICAI_CIRC_MEERUT_
> A person X has borrowed from his own HUF account towards purchase
> He is paying interest on the borrowal . However the interest paid
> accured in the books of X & that of HUF's and not actually paid .
> allowable as deduction u.s 24. If yes, how long can we go on with
> arrangment ?
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