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[Rule 3(7)(i)] : Interest free or Concessional Loan from Employer


Interest free or interest charged at a concessional rate on loan given by employer to an employee or any member of his/her family is a perquisite given to an employee which is chargeable to tax. Valuation of this perk shall be made keeping in mind the following points—

  1. Interest is to be calculated at the rate charged by State Bank of India on similar type of loan as on the 1st day of the relevant previous year. State Bank of India notifies the lending rates from time to time.

  2. Interest is to be calculated for each month of the relevant previous year on the ‘maximum outstanding monthly balance’.

  3. Interest paid by employee (or charged by employer), if any, is to be deducted out of total interest for the full previous year calculated as above.

  4. ‘Maximum Outstanding Monthly Balance’ means the amount of each loan due to the employer on the last day of each month. This means that in case any amount of loan has been repaid in any month the same is to be deducted and only the balance amount due to the employer shall be known as maximum outstanding monthly balance.

  5. For the assessment year 2014-15, interest rates charged by State Bank of India as on 1-4-20 13 shall be applicable.

In case the employer has given a loan to his employee for the following purposes, such a perquisite is not chargeable to tax.

  1. Where the total amount of loan or loans given by an employer to an employee does not exceed Z 20,000.

  2. Where the loan is given for medical treatment of diseases specified in Rule 3A. However this exemption shall not be available upto the amount of loan reimbursed to the employee under any medical insurance scheme.

(for Assessment Year 2014-15)

                                                                                                            Rate of Interest
1. Housing loan
Loan upto 30 lakhs                                                                           9.95%
Loan above 30 lakhs                                                                         10.10%

2. Car Loan
Any amount                                                                                       10.45%

3. Loan for two wheeler
Any amount                                                                                       17.95%

4. Education Loan
(1) Loan upto 4 lakhs                                                                        13.20%
(ii) Loan above  4 lakhs but upto 7.5 lakhs                                    13.45%
Loan above   7.5 lakhs                                                               11.45%
(Note. In case loan is availed by a girl student, a
concession of 0.5% shall be allowed)

5. Personal loan                                                                              18.20%

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More Topics .... @ SALARY
Salary-Definition & Meaning

Computation of Salary Income

Definition of Word ‘Salary’ [ Section 17(1)]

Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

Important Points / Characteristics for Computing Salary Income

Provident Fund

Treatment of Provident Funds (PF) for Computing Salary Income

Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income

Allowance [ Section 17(3)]

Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

Fully Exempted Allowances for Computing ‘Salary’ Income

Fully Taxable Allowances for Computing ‘Salary’ Income

House Rent Allowance (HRA) for Computing ‘Salary’ Income

Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

Meaning and Types of Perquisites [ Section 17(2)]

Taxability of Perquisites for Computing Salary Income

Perks Exempted From Tax for all Employees and not added in Salary Income

Rent Free House [Section 17(2)(i) Rule 3(1)]

Rules Regarding Calculation Of Value Of Rent Free House

Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

Interest free or Concessional loan from employer [Rule 3(7)(i)]

Valuation of Perk in respect of Travelling, Touring, Accommodation

Food or Beverages Facility by Employer to Employee

Valuation of Perquisite in respect of Gift Voucher or Token

Valuation of Perquisite in respect of Credit Card

Valuation of Perquisite in respect of Club Facility

Use of Moveable Assets by Employer to Employee

Transfer Of Moveable Assets to the employee

Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

Perquisite of Free domestic servants [Rule 3(3)]

Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]

Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

Leave Travel Concessional (LTC) Assistance [Section 10(5)]

Death-Cum-Retirement Gratuity [Section 10(10)]

Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

PENSION [Monthly and Commuted] for Computing Salary Income

Leave Encashment [Section 10(10AA)] for Computing Salary Income

Any amount received as compensation on termination of employment [Section-10B]

Any amount received on voluntary retirement [Section 10(10C)]

Payment received from Recognised Provident Fund [Section 10(12)]

Any payment from Superannuation Fund [Section 10(13)]


Entertainment Allowance to Government Employees [Section-16(ii)]

Tax on Employment Under Section - 16(iii)


Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

Qualifying Amount ( Q.A.) for Deduction U/s 80C

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