interest on loan taken for residential flat in proprietorship firm

[sachin shilamkar]

We are planning to purchase residential flat in the name of proprietorship firm as guest house for the same we are taking loan from bank.

Can we claim entire interest as business expenses in the firm's account. Proprietor is already having home loan in his personal name for the existing property which is self occupied.

Regards

Sachin

[Guest]

Since it is the Proprietorship firm owner and the business are one and the same.

If the Loan is taken in the name of the Proprietor Deduction of Interest paid on Loan can be claimed.

If the Loan is taken on Firm name under the name of Guest House, Interest cannot be claimed as deduction but the maintenance expenses may be claimed as deduction as business expenditure.

[Sarveshwar Mundra]

If running a guest house is business of the proprietorship firm, then the entire interest allowable as business expenses.

AI Summary

Interest Deductibility for loan on flat used as guest house depends on loan holder and business character. Deductibility of interest for a loan on a flat used as a guest house hinges on who holds the loan and the activity's business character: if the loan is in the proprietor's name interest may be claimed; if in the firm's name one view disallows interest but allows maintenance deductions while another view allows full interest where the guest house is the proprietorship's business.