I have taken a loan from my wife to buy a house. I understand that interest on money borrowed from relatives including wife is deductible under section 24(b). Are there any restrictions regarding the rate of interest that can be paid to relatives? Is a formal seal or registered agreement required for this purpose and does it need to be attached with ITR (Return of Income Tax)?
under Section 24(b) Under the Income Tax Act, you can claim deduction in respect of interest on loan taken for the purpose of purchase, construction or repair and renovation of your house. Like this Loan Can be taken from anyone including your friends and relatives. Thus interest on loan taken from your wife will also be available for deduction under section 24(b). Though there are no clear conditions under the Income Tax laws with regard to the rate of interest that you can pay on such loans, the rate of interest on such loans should be reasonable and comparable with the rates available in the market. This can be benchmarked against the prevailing home loan rarity.
As per the latest provisions of law, you are not allowed to attach any document with your return of income in respect of any of your claim for deduction or exemption including claim of interest, but you are required to obtain and keep on your record Documentary proof about the loan and the interest paid, may be required by the Assessing Officer, as your income tax return is selected for detailed scrutiny. While there is no need to enter into any formal written and stamped agreement, you need to obtain a certificate from the lender specifying the amount of interest in respect of such loan for the year if the house property is self-occupied. Is. You must also be able to prove that the funds thus borrowed were actually used for the purpose of purchasing your home.
Balwant Jain is a tax and investment specialist and can be contacted on Twitter at jainbalwant@gmail.com and @jainbalwant.
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