CMA Intermediate · Direct and Indirect Taxation · Income from House Property
Mr. Dinesh Patel borrowed Rs. 20 lakh on 1 April 2023 to construct a house completed on 31 March 2026. Interest payable for the pre-construction period up to 31 March 2026 is Rs. 450000. The house is let out from 1 April 2026. Pre-construction interest deductible for the tax year 2026-27 under section 22(1)(c), assuming nothing allowed elsewhere, is:
The deduction is Rs. 90000. Pre-construction interest of Rs. 450000 is allowed in five equal instalments over the year of completion and the next four tax years, giving Rs. 90000 each year.
- ARs. 90000Correct
- BRs. 450000
- CRs. 150000
- DRs. 112500
Explanation
Section 22(1)(c) allows prior-period interest in five equal instalments, starting with the tax year of acquisition or construction and the four following years. 450000/5 = 90000 per year. Rs. 450000 claims it all in one year; Rs. 150000 divides by three.
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