Can interest paid in loan be counted as cost of acquisition?

sir/madam,
i had purchased a flat in dec 2009 with a loan from nationalized bank after putting some margin money. I sold off the same flat in july 2016 with a higher price. I have paid loan emi regularly and taxes also regularly. I used a small amount from this transaction to repay part of loan and the buyer got the loan transferred on his name.Now in order to calculate long term capital gain how will my payment of emi be taken into account?
Asked 4 months ago in Capital Gains Tax from Pune, Maharashtra
Dear Sir,

If you have not taken the deduction of interest paid on Loan EMI under section 24 during earlier years, you can certainly take interest on loan as part of cost.

But in case you have taken the deduction, certain court rulings suggests that you cannot add interest as part of cost of acquisition as it will tantamount to double deduction. However, contrary to the above view, certain court rulings have allowed the double deduction saying that both the section are different and does not explicitly restrict an Asssesee to take benefit of both the sections.

Please feel free to call/ revert in case of any doubts

Thanks and Regards
Abhishek Dugar
CA CS B.Com
Caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
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EMI can never be taken in to account for calculating cost of acquisition. However, if you have not claimed interest deduction under income from house property in earlier years, then you may add only interest part it to cost of acquisition as per one of the Tribunal judgement. However, the ITO may not accept it at his level as this is not a settled practice.
Sagar Jayawant
CA, Thane
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Sir,

As per sec 48 which provides for computation of capital gain taxes, any cost incurred for acquisition of the asset would form part of the cost of acquisition, here there is no doubt that interest paid towards housing loan is a direct expenditure incurred in order to acquire the capital asset and hence  while computing your capital gains tax you can include the interest paid towards the loan repayment of house as a part of  your cost of acquisition. 

For any further clarifications or queries you may write to us.

Thanks & Regards,

Ria Nagpal

Manish Nagpal & Co
Chartered Accountants
Ria Nagpal
CA, Ahmedabad
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In the calculation first indexed cost of acquisition will be deducted from the sale proceeds. You can also deduct the interest paid on H. Loan. Remaining will be capital gains tax and tax be payable on the same.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Dear Sir,

Yes, surely the amount paid as Interest can be considered as the Cost of Purchasing the property.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP. 
Rohit R Sharma
CA, Mumbai
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