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Example One |
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X takes a loan of Rs 40,000 @ 15% p.a. for constructing a house on June 11,
2000. Construction of the house is completed on January 20, 2006.
Date of repayment of loan is (a) January 31, 2010, or (b) June 30
2007, (c) October 31, 2003.
If date of repayment of loan is January 31, 2010 or June 30, 2007
then pre-construction period ends on March 31, 2005 (being March
31 immediately prior to the date of completion of construction/acquisition).
Interest on Rs 40,000 @ 15% p.a. from June 1, 2000 to March 31,
2005 is Rs 28,997. Amount of installment deductible in first five
years is Rs 5,799 (i.e. Rs 28,997/5).
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| Example
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| Example
six |
| If date of repayment of loan is October
31, 2003, then pre-construction period ends on October 31, 2003 (being
March 31 immediately prior to completion of construction or date of
repayment of loan, whichever is earlier). Interest on Rs 40,000 @
15% p.a. from June 1, 2000 to October 31, 2003 comes to Rs 20,500
(instalment deductible in first 5 previous years being Rs 4,100).
The table given below highlights interest deductible in different
previous years: |
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| Computation of Tax |
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Previous years |
| Ending on
March 31, 2006 |
2006-07 |
2007-08 |
2008-09 |
2009-10 |
2010-11 |
2011-12 |
| Rs |
Rs |
Rs |
Rs |
Rs |
Rs |
Rs |
| If date of repayment of loan
is January 31, 2010: |
| Current year’s interest |
6,000* |
6,000 |
6,000 |
6,000 |
6,000 |
5,014 |
Nil |
| Pre-construction period’s interest |
5,779 |
5,779 |
5,779 |
5,779 |
5,779 |
Nil |
Nil |
| Total deduction |
11,779 |
11,779 |
11,779 |
11,779 |
11,779 |
5,014 |
Nil |
| If date of repayment of loan
is June 30, 2007: |
| Current year’s interest |
6,000* |
6,000 |
1,479 |
Nil |
Nil |
Nil |
Nil |
| Pre-construction period’s interest |
5,779 |
5,779 |
5,779 |
5,779 |
5,779 |
Nil |
Nil |
| Total deduction |
11,779 |
11,779 |
7,278 |
5,779 |
5,779 |
Nil |
Nil |
| If date of repayment of loan
is October 31, 2003: |
| Current year’s interest |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
| Pre-construction period’s interest |
4,098 |
4,098 |
4,098 |
4,098 |
4,098 |
Nil |
Nil |
| Total deduction |
4,098 |
4,098 |
4,098 |
4,098 |
4,098 |
Nil |
Nil |
*Although the construction of the property is completed on January
20, 2006 (i.e. during 2005-06, the interest of the entire financial
year 2005-06 is treated as current years interest. Interest prior
to the year 2005-06 (i.e. the year in which construction is completed)
is pre-construction period’s interest. The same rule is applicable
if the construction is completed on March 31,
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