Section 25 of ITA, 1961 : Section 25: Amounts Not Deductible From Income From House Property

Explanation using Example

Imagine a resident individual in India, Mr. Sharma, who owns a property in the UK that he rents out. The rental income he earns is subject to UK tax law, and he pays interest on a mortgage for that property to a UK bank. According to Indian law, he must also declare this foreign income on his Indian income tax return. However, if Mr. Sharma has not paid tax on the interest component in India and no tax was deducted at source under Indian tax laws (Chapter XVII-B), he cannot claim this interest payment as a deduction from his rental income from the UK property when calculating his income from house property for his Indian income tax return. This is because the interest is payable outside India and there is no agent in India responsible for the interest payment.