Union Budget 2023-24 + FINANCE Bill, 2023

Prevention of double deduction claimed on interest on borrowed capital for acquiring, renewing or reconstructing a property

Under the existing provisions of the Act, the amount of any interest payable on borrowed capital for acquiring, renewing or reconstructing a property is allowed as a deduction under the head "Income from house property" under section 24 of the Act.

2. Section 48 of the Act, inter alia, provides that the income chargeable under the head "Capital gains" shall be computed, by deducting the cost of acquisition of the asset and the cost of any improvement thereto from the full value of the consideration received or accruing as a result of the transfer of the capital asset.

3. It has been observed that some assessees have been claiming double deduction of interest paid on borrowed capital for acquiring, renewing or reconstructing a property. Firstly, it is claimed in the form of deduction from income from house property under section 24, and in some cases the deduction is also being claimed under other provisions of Chapter VIA of the Act. Secondly while computing capital gains on transfer of such property this same interest also forms a part of cost of acquisition or cost of improvement under section 48 of the Act.

4. In order to prevent this double deduction, it is proposed to insert a proviso after clause

(ii) of the section 48 so as to provide that the cost of acquisition or the cost of improvement shall not include the amount of interest claimed under section 24 or Chapter VIA.

5. This amendment is proposed to take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.

[Clause 22]

 

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Full Text:

Union Budget 2023-24 + FINANCE Bill, 2023

Prevention of double deduction: interest claimed under house property or chapter VIA excluded from cost of acquisition for capital gains. The Finance Bill proposes a proviso to section 48 that the cost of acquisition or cost of improvement shall exclude any interest amount claimed as a deduction under section 24 or under Chapter VIA, to prevent double deduction when computing capital gains.