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Home loan interest paid to a relative

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Interest on money borrowed to buy, build or repair a house is deductible even if the lender is a relative or friend. You need a certificate from the lender showing interest, and the loan must be used for the house. The lender must report the interest as income.

Provisions

Sec 24(b) (now Sec 22(1)(b))

Analysis

Sec 24(b) (now Sec 22(1)(b)) is not limited to bank loans. If you paid your uncle ₹1,00,000 interest at a reasonable rate and the money went into the flat purchase, you can claim it, within the ₹2,00,000 limit for a self-occupied house under the old regime. Keep a written agreement, bank transfers and his certificate. He shows the ₹1,00,000 as income from other sources.

Close

  1. Make a written loan agreement with rate and terms.
  2. Route the loan and interest through banks.
  3. Get an interest certificate from your uncle each year.
  4. Claim interest in Schedule HP.

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Connect nowPay and start: Return with rent from two or more properties and home loan interest, Sec 24(b), ₹2,499

General guidance from TaxSavvy’s library of money processes. Laws change; your Savvy confirms the answer on your exact case before anything is filed.

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