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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Nature of Business

Under section 32(b) of the Income-tax Act, 2025, which interest is excluded from the deduction for interest on capital borrowed for business?

Interest on capital borrowed to acquire an asset, for the period from the borrowing date until the asset is first put to use, is excluded from the deduction, whether or not it is capitalised in the books, under section 32(b)(i).

  1. AInterest on capital borrowed for acquiring an asset, for the period from the date of borrowing until the asset is first put to useCorrect
  2. BInterest on capital borrowed for working capital needs
  3. CInterest on capital borrowed after the asset is first put to use
  4. DInterest paid on recurring subscriptions in Mutual Benefit Societies

Explanation

Section 32(b)(i) says deductible interest does not include interest on capital borrowed for acquiring an asset, whether capitalised or not, from the date of borrowing until the asset is first put to use. Interest after first use is not excluded by this rule.

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