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"Deduction Of Interest On Loan"-Income from Other Sources'


While computing income from other sources, one of the most important deductions which you can claim is the deduction for payment of interest on loan. There is no upper limit of the rate of interest. An assessee can take a loan from any person and at any rate of interest. For instance, the interest paid on loan taken for hire of plant and machinery, etc., would be allowed deduction. However, as per the Finance Act, 2003 the dividend income as also the income from units of mutual funds is exempted from income tax. Hence from the point of tax planning do not borrow money to make these investments because the


interest on loan, if any, now paid by you would not be allowed as a deduction in view of the complete tax exemption of dividend income and income from units of mutual funds.

Key Points

• Expenses incurred on earning any taxable income are tax deductible.

• Interest paid on loan taken to invest in the asset would be deducted only if the income is taxable.

• In respect of exempted incomes interest or any other expense would not be deducted.
CONTENT - 'Income from Other Sources' and Its Computation (Section 56)

Related Topics....'Income from Other Sources'

Scope of Income Chargeable under the head 'Income from Other Sources' (Section 56)
Taxable Incomes under the head 'Income from Other Sources' [Section 56(2)]
Taxability of Dividend Income [Section 56(2)(i)]
Winnings from Lotteries, Crossword Puzzles, Horse Races and Card Games [Section 56(2)(ib)]
Interest on Securities under the head 'Income from Other Sources' [Section 56(2)(id)]
Income from Letting Out of Machinery , Plant or Furniture [Section 56(2)(ii)]
Income from Composite Letting of Machinery, Plant or Furniture and Buildings [Section 56(2)(iii)]
Share Premium in excess of the Fair Market Value to be treated as Income [Section 56(2)(viib)]
Interest on Compensation or Enhanced Compensation [Section 56(2)(viii)]
Forfeiture of Advance Received for Transfer of a Capital Asset to be Taxed under the head "Income from Other Sources" [Section 56(2)(ix)]
Income of any person to include not only gift of money from any person(s) but also the gift of property (whether movable or immovable) or property acquired for inadequate consideration [Section 56(2)(x), w.e.f. A.Y. 2018-19]
Amount Expressly Disallowed in computing the 'Income from Other Sources' (Section 58)
Deductions Allowed in computing the 'Income from Other Sources'(Section 57)

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