INCOME FROM HOUSE PROPERTY
Deductibility of Processing Fees and Pre-payment Charges Under Section 24(b)
Manoj Gupta
Section 24(b) provides for deduction of interest on borrowed capital in the computation of income from house property. An issue has been arising as to whether processing charges or pre-payment charges with regard to making available the loan, can be claimed as deduction under Section 24(b). The judiciary have been allowing deduction towards such charges on the basis of the wider scope of interest as defined under Section 2(28A).
1. Deduction for interest on borrowed capital
According to the first proviso to Section 24(b), in respect of a property covered by the Section 23(2), i.e., where the property consists of a house or part of a house which
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him;
the amount of deduction shall not exceed ₹ 30,000.
Such interest may be in respect of money borrowed for acquisition, construction, repair, renewal or reconstruction of the property.
The second proviso of Section 24(b), however, provides that where the property consists of a house covered by the Section 23(2), i.e., house or part of a house which
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him;