Interest on borrowed capital - (New) Section 32(b) / (Old) Section 36(1)(iii)

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....n rule. • If you borrow money for business or professional use, the interest you pay on that borrowing is deductible while computing taxable income. • Key condition: the borrowing must be for business/profession, not personal use. Restriction for asset acquisition Not all interest is immediately deductible. • If you borrow money to acquire an asset (lik....

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....e Income Tax Act, 1961 [ Upto 31.03.2026 ] • Amount of Interest paid in respect of capital borrowed for the purposes of business and profession is allowed as deduction (Subject to section 43B). • However, any amount of the interest paid in respect of capital borrowed for acquisition of new asset (Whether capitalized in the books of accounts or not) for any period beginnin....

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....s is not relevant for the purpose of allowance of expenses of interest u/s 36(1)(iii). [ M/s Brahmaputra Finlease Pvt. Ltd. Versus ACIT, Central Circle- 15, New Delhi 2023 (5) TMI 541 - ITAT Delhi ] Following case interest expenditure allowed or not • Allowed  • Interest paid to wife and daughters on money allotted to them on partition is deductible....

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....ital provided. Interest paid on such capital is not deductible u/s 36(1)(iii).  • Guarantee Interest paid to shareholder on paid-up capital is not deductible.  • Interest on advance tax or late filling of return is not allowable as deduction. • Interest is not allowable as deduction unless tax has been paid or the tax has been deducted at source u/s....