Interest free loan/Loan at concessional
rate of interest :
If a loan is given to an employee (or any
member of his household), interest
thereon is a perquisite chargeable to tax.
It is taxable in hands of all employees (whether specified or not) on the
following basis :
1) Find out the ‘maximum outstanding
monthly balance’ (i.e. the aggregate outstanding balance of each loan as
on the last day of each month)
2) Calculate interest on loans charged at
the rate applicable to the similar loans as prescribed by State Bank of
India as on the 1st day of April of the relevant previous year
(e.g. 1st April 09 for A Y 2010-11) on the amount derived
in step 1
XXX
3) Less: Interest on loans charged by
Employer, if any XXX
4) Balance amount is the taxable non-
monetary
perquisite on concessional loans
XXX
Note: Exemption is given to the above rule
in case of following situations :
1. When the amount of the original loan in
the aggregate does not exceed Rs. 20,000/-.
2. If a loan is taken for medical
treatment in respect of diseases specified in Rule 3A.(the exemption is
not available to the amount of the loan that has been reimbursed to the
employee under any medical insurance
scheme.)
