Can You Add Unclaimed Home Loan Interest to Cost of Acquisition?
Many homebuyers in India take loans to buy property. But did you know that unclaimed home loan interest can be added to the cost of acquisition while computing capital gains tax? Several court rulings have supported this approach.
Changes in Capital Gains Tax Rules (Effective 23 July 2024)
The Indian tax regime on capital gains has changed:
- Indexation is removed for computing general capital gains income.
- Alternative tax computation is available for long-term capital gains on immovable property.
- Tax Rate Choices:
1) 12.5% tax without indexation.
2) 20% tax with indexation (only for property bought before 23 July 2024).
How to Apply Indexation on Home Loan Interest
| Scenario | Indexation Allowed From |
| Single-payment property purchase | Year of acquisition |
| EMI-based property purchase | Year of each EMI payment |
Applying indexation from the year of home loan payment may be safer to avoid litigation.
Did You Know?
If you sell a property after holding it for two years, it qualifies as a long-term capital asset, attracting lower tax rates.
