DEDUCTION OF INTEREST ON LOAN

[S.C. WADHWA]

Mr. A gave ₹ 5 lacs to a builder for purchase of flat in delhi and took a loan of ₹ 10 lacs. Finance Co. gave ₹ 10 lacs directly to builder for purchase of flat on behalf of Mr. A. Thus, total cost of flat purchased by Mr. A is ₹ 10 lacs.

The flat contruction was completed after three years i.e. three years after giving ₹ 15 lacs. During these three years, builder paid interest to Financ Co.

During the financial year 2012-13, Mr. A obtained possession of flat and paid interest of ₹ 300000/-.

Mr. A had now two flats one in delhi and 2nd in haryana.

Query is

How much deduction will be available on account of interest and in which manner.

AI Summary

Deduction of interest on home loan: clarification sought on eligibility and manner of claiming for construction-period and post-possession interest.
Issue: tax treatment of interest on a home purchase loan where part-payment was made to the builder and the finance company paid the builder directly. Construction completed after an extended period during which the financier received interest from the builder; purchaser paid interest on the loan after taking possession and now owns a second property. Query asks the amount and manner of claiming deduction for interest, considering pre-possession and post-possession interest and multiple-property ownership.