QUOTE(iamsolucky @ Jan 11 2019, 10:51 AM)
Thank you so much for the advice.
As for the madam leong case you share above, regarding the refinance matter. How if:
Madam Leong refinance again to another bank with loan amount RM1.8 million, how to calculate the loan interest for the rental tax deduction ?
Madam Leong previously refinance from bank A to bank B with loan balance from RM1.0 million to RM1.3million, now with bank C RM1.8million.
Which is correct for loan interest deduction ?:
1) 1.0 mil / 1.8 mil x loan interest from bank C or
2) 1.3 mil / 1.8 mil x loan interest from bank C
Thanks in advance
Knowing LHDN does not intend to lose tax revenue, their calculation will be :
The balance of 1st loan at time of 2nd refinancing / 1.8 mil x loan interest from bank c
Ie. Should be lesser than 1.0 million because, assuming there is no refinancing at all, the monthly installation will reduce the principal amount, hence interest expense should reduce accordingly.
I think the main criteria hold by LHDN will be always use the original financing amount an investor needed at the time of buying the property. The interest expense incurred for this original financing amount will be allowable.
You cannot keep on re-financing say, every 10 years and claim interest expense indefinitely
The safest and to avoid possible penalty, it is best to keep the repayment schedule of the 1st loan and use the balance principal at the time of refinancing for income tax computation
However, I am not sure how many people will follow this way