InvestorQ : I have taken is farmer loan ls there any deductions available on tha interest paid on loan
Anand Raj made post

I have taken is farmer loan ls there any deductions available on tha interest paid on loan

Answer
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sara Kunju answered.
1 year ago


Agricultural loans are any loans that are availed by a farmer to fund seasonal agricultural operations or related activities like animal farming, pisciculture. In addition purchasing of land or purchasing of agricultural tools, storage of produce and transport also are included under the purview of agricultural loans.

The deduction here is dependent on the ultimate allocation or use of the loan availed. There is no such specification has been made regarding taxability of interest on farmer loan under any particular section, but it can be considered as general interest and the same treatment can be applied to the same.

As per section 36(1) Interest expense is only allowable if the loan taken is for the purpose of the business of the assessee and if it is used for the purpose of purchase of an asset which yielded exempted income, such interest expenditure cannot be allowed as deduction.

Since agriculture activities are mostly exempted under income tax act, hence the provision that if the loan amount has been used for the purchase of an asset which yielded exempted income, becomes applicable. Therefore, you can consider that, since most of your agriculture income is non-taxable, the interest paid thereon shall not be allowed as a deduction.
You can also refer the case ACIT  Vs Ms. Mini Muthoottu Credit India (P) Ltd, the case was due with ITAT Cochin.