Deduction of Interest on housing loan

[ASHISH DESAI]

an employee submits a declaration/receipts for rent payment for claiming HRA deduction u/s 10(13A) of the Act. he also submits a letter from the close relatives stating the interest charged by them on housing loans given by them to an employee. No nexus can be proved by the employee that whether this loan was actually utilised towards the purchase of house property. my querry is, is it the prime responsibility of an employer to ask for the nexus or a declaration from the employee that this loan is actually a hsg loan. can the employer give deduction of interest on hsg loan u/s 24(b). can this deduction given to an employee who avails personal loan from the banks & merely submits certificate re int payment. I have doubts about the possibility of giving this deduction. pl. discuss & clarify this situation.

AI Summary

Employers Must Verify Housing Loan Use for Interest Deductions Under Section 24(b), Ensure Transparency to Avoid Tax Fraud An employee inquires whether an employer should verify the use of a housing loan for property purchase when granting interest deductions under section 24(b) of the Income Tax Act. Responses suggest that employers should obtain a certificate confirming the loan's purpose and rely on employee declarations, provided they are made in good faith. The discussion highlights the importance of transparency and the potential consequences of false declarations. Employers are advised to act responsibly and verify circumstantial evidence, like rent receipts, to avoid tax fraud allegations. Recent case law and CBDT circulars are referenced for guidance.