Allowable Deductions from Interest received on Securities
Interest on securities can be defined as the sum of interest paid or payable for securities issued by Government organizations or securities approved by Government or companies or other organization. Whether someone is looking to control the tax consequences of a stock sale or they want to leverage their investment dollars, people borrow money to invest all the time. Even though investors use borrowed money to invest, most do not understand they can deduct the interest from these loans and even fewer understand how to comply with the deduction rules. In computing the income of an assessee under this head, the following deductions are allowable:
(a) Bank Commission for collecting interest: bank commission is an admissible allowance, but bank commission for collecting interest on Government securities is not an allowable deduction.
(b) Interest on borrowed capital for investment: Interest on loan taken specifically for the purpose of investment in securities subject to the condition that the interest chargeable to tax under ITO, 1984 is payable within the taxable territories.