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—
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.
Interest is to be calculated for each month of the relevant previous year on the ‘maximum outstanding monthly balance’.
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.
‘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.
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.
Where the total amount of loan or loans given by an employer to an employee does not exceed Z 20,000.
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.
SBI LENDING RATES AS ON 1-4-2013
(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%
(iii) 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%