Can I claim tax benefits on Interest paid on home loan taken from Friend ?

POSTED BY Jha ON January 26, 2014 9:57 am COMMENTS (6)

Dear Friends,

I took a loan from a friend for purchase of house and the house is Let-out. I am paying interest to the friend.

I request you to please let me know if I can claim the interest in calculations of the Income Tax. Our HR person says, I can claim interest portion only for the loans taken from Banks and other Financial Institutes only and not from the individuals. Is it correct? HR is asking for Provisional interest certificate from the Banking / Non banking financial institutes.

Please let me know, is there any way for me to claim the Interest component being paid to my friend. My friend has got PAN card and is ready to help me. I would like to show the interest as part of Loss on Housing Property, as the house is Let Out and is in another city.

Thanks in advance for your valuable suggestions.

Regards, Jhaji

6 replies on this article “Can I claim tax benefits on Interest paid on home loan taken from Friend ?”

  1. ashalanshu says:

    Dear Jha, in case your employer do not entertain, you can claim the benefit in your ITR but in this case, your employer had already deducted tax and you w’d have to wait for refund from Income Tax.



  2. Jha says:

    Thanks Mr. Ashal for the info. I will try to avail the benefit from the employer only in order to save tax.

    Regards, Jha

  3. ashalanshu says:

    Dear Jhaji, normally employer does not entertain such private transactions. So better to avail the desired benefit at the time of filing your ITR.



  4. ashalanshu says:

    Dear Jhaji, for your given query, your employer ‘ll not provide benefit at source but youc an avail the same while filing your ITR. As rightly pointed out above by dear Rahul, you should have documental eveidence as proof for loan transactions.



    1. Jha says:

      Dear Ashal Ji and Rahul Ji
      Thanks for your replies.
      1. I do have Promisary Note given to my friend. It states that I took loan for the purchase of house. It also states the rate of interest (1% pm). No bank transactions happend.
      2. Is it not possible for the employer to accept the loan and provide tax benefit.

      Thanks, Jhaji

  5. rahul123 says:

    Simple answer to this is yes.

    But, do you have supporting documents? Like loan agreement and bank statement?


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