Q & A:Interest Subsidy on Home Loan recd. - Treatment of Income Tax-Taxable or not

[P.D.RUNGTA]

QUERY:Interest Subsidy on Home Loan recd. - Treatment of Income Tax-Taxable or not

Dear Professional Friends,

Can you suggest on the Income Tax Treatment of "Interest Subvention (Subsidy) received @1% on Home Loan through Nationalised Bank" as :-
a) Whether the above Subsidy is Tax free and/or adjusted against Cost of Flat in perview of U/s.43 of the IT Act.
or
b) Whether the above Interest Subsidy is adjusted against the Actual Interest payment and thereafter the Net Interest payment (less Subsidy) claim U/s.24(b) of The I.Tax Act.
or
c) The above Interest subsidy is taxable under "Other Sources"
or
d) The above Interest Subsidy is "Totally Tax -free" and adjusted against Capital A/c.

Please advise us in the context of Asst. Year : 2011-12.

Thanking You,
yours
CA Ashok Kumar Singh, FCA & FICWA
ashok20...@yahoo.co.in
(M) 8013512051

 

REPLY:1

Dear Mr. Ashok,

Please note that the above Interest Subsidy is adjusted against the actual Interest payment and thereafter the net Interest payment (less Subsidy) is to be claimed U/S.24(b) of The I.Tax Act.

Yours

CA Mahesh Kumar Gupta 
mkg...@gmail.com

REPLY:2

In my view Section 43 shall have no application in this instance considering that it applies only in the context of business income.Section 24(b) speaks about a deduction on Interest paid on borrowed capital.in my view as the subvention has the effect pf reducing the interest payable the amount of deduction for interest should get reduced by the subsidy.
regards
kalidas

REPLY:3

Dear Ashok 

The subsidy needs to be adjusted against the gross interest payable. 

CA C S Sreenivas, Sent from my BlackBerry® smartphone

REPLY:4

Dear Friend
In my opinion based on the logic of IT Act.
If the interest is reduced by the bank directly then no adjustment to be made at 
your end but if the subsidy part is remain credited in your non loan account 
then you may compute it as income from other sources.
CA.SKPatnaik,MCom,FCA

Best Regards,
Pramod Dayal Rungta
M.Com.,LL.B.,AICWA.,DISA(ICAI).,FCA
Member EIRC ICAI (2010-12)

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[lalit kumar agarwal]

the purpose of the interest subsidy has to be looked into. if the subsidy is for reducing the interest burden, lesser amount would be allowed as deduction u/s 24. if the subsidy is for promoting the house construction, it will be a capital receipt.

Lalit Kumar Agrawalla, FCA
M.No. 9332014316

On Thu, 21 Apr 2011 11:22:25 +0530 wrote

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