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CS Executive · Tax Laws and Practice · Income under the Head House Property

Ms. Kapoor borrowed Rs. 40,00,000 to construct a house in which she lives; construction was completed within five years of the end of the tax year of borrowing, and she holds the lender's interest certificate. The annual interest is Rs. 3,50,000 and the property is of the type referred to in section 21(6). What is the maximum interest deduction under section 22 of the Income-tax Act, 2025 for the tax year?

The maximum deduction is Rs. 2,00,000. Under section 22(2)(a) of the Income-tax Act, 2025, interest on borrowed capital for such property is capped at Rs. 2,00,000 when construction finishes within five years and the lender's certificate is furnished, even though actual interest is Rs. 3,50,000.

  1. ARs. 30,000
  2. BRs. 3,50,000
  3. CRs. 1,50,000
  4. DRs. 2,00,000Correct

Explanation

Section 22(2)(a) caps interest deduction for such property at Rs. 2,00,000 when acquisition or construction is completed within five years and the certificate is furnished. Actual interest of Rs. 3,50,000 exceeds the cap. Rs. 30,000 applies only in other cases.

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