The benefit of interest free loan or loan at concessional rate of interest is given to an employee (or to any member of his household) is chargeable to tax.
The value of benefit provided to an employee shall be determined as the sum equal to the interest calculated at the rate charged per annum by the State Bank of India (i.e. leading bank), as on the 1st day of the in respect of the loans advanced by it for the same purpose. This rate shall be applied to the maximum monthly balance outstanding.previous year
Moreover, interest shall be calculated on the outstanding balance as on the last day of each month.
Maximum Monthly balance outstanding: Aggregate outstanding amount for each loan as on the last day of each month.
For Example: If the housing loan is taken for FY 2012-13, then the only housing interest will be at the rate charged p.a by the SBI as on 1.4.2012.
Further, the amount of perquisite shall be reduced by the amount of expenses reimbursed by the employee or the member of the household.
For this purpose member of household includes:
a) Loan is taken for of specified diseases. But if any amount under medical insurance scheme is reimbursed to the employee then no exemption will be availed.medical treatment
b) If the aggregate of original loan does not exceed Rs. 20,000.
This can be well understood with examples:
1) The loan of Rs.2, 00,000 is given to employee on 1-7-2012 by the employer.
(SBI Rate on 1-7-2012 is 12% & on 1-4-2012 is 11%).
Solution:
Taxable value of perquisite in respect of interest of loan:
For July 2012 – March 2012 Rs. 2, 00,000*11%*9months = Rs.16, 500.
Since, rate of SBI as on 1st day of previous year (1-4-2012) for July-March (9 months) is considered.
2) Employer gives loan of Rs.30, 000 is given to employee on 1-4-2012, where employee repays Rs.12, 000 on 1-7-2012(Rate of SBI 11%).
Solution:
Taxable value of perquisite in respect of interest on loan:
For April 2012- June 2012 Rs.30, 000*11%*3months = Rs.825
For July 2012- March 2013 Rs.18, 000*11%*9months = Rs.1485
Therefore, Total taxable amount = Rs.2310 (Rs. 825+ Rs.1485)
Since in this case, original loan exceeds Rs.20, 000 then perquisite value will be computed even if outstanding balance i.e. Rs. (30,000-12,000) falls below Rs.20, 000.
3) Employer gives medical loan of Rs.2, 00,000 for specified disease to employee on 1-10-2012. Employee gets insurance claim of Rs.80, 000 on 1-1-2013 but the same was not repaid to the employer.(SBI Rate 11% p.a)
Solution:
Taxable value of perquisite in respect of interest on loan:
For Oct 2012- Dec 2012 Rs. Nil
For Jan 2013-Mar 2013 Rs. 80,000*11%*3months = Rs.2200
Since, in this case amount under medical insurance scheme is not reimbursed to the employer then Rs.2200 will be taxable in the hands of employee.
The value of benefit provided to an employee shall be determined as the sum equal to the interest calculated at the rate charged per annum by the State Bank of India (i.e. leading bank), as on the 1st day of the in respect of the loans advanced by it for the same purpose. This rate shall be applied to the maximum monthly balance outstanding.previous year
Moreover, interest shall be calculated on the outstanding balance as on the last day of each month.
Maximum Monthly balance outstanding: Aggregate outstanding amount for each loan as on the last day of each month.
For Example: If the housing loan is taken for FY 2012-13, then the only housing interest will be at the rate charged p.a by the SBI as on 1.4.2012.
Further, the amount of perquisite shall be reduced by the amount of expenses reimbursed by the employee or the member of the household.
For this purpose member of household includes:
- Spouse;
- Children and their spouses;
- Parents;
- Servants and dependents;
a) Loan is taken for of specified diseases. But if any amount under medical insurance scheme is reimbursed to the employee then no exemption will be availed.medical treatment
b) If the aggregate of original loan does not exceed Rs. 20,000.
This can be well understood with examples:
1) The loan of Rs.2, 00,000 is given to employee on 1-7-2012 by the employer.
(SBI Rate on 1-7-2012 is 12% & on 1-4-2012 is 11%).
Solution:
Taxable value of perquisite in respect of interest of loan:
For July 2012 – March 2012 Rs. 2, 00,000*11%*9months = Rs.16, 500.
Since, rate of SBI as on 1st day of previous year (1-4-2012) for July-March (9 months) is considered.
2) Employer gives loan of Rs.30, 000 is given to employee on 1-4-2012, where employee repays Rs.12, 000 on 1-7-2012(Rate of SBI 11%).
Solution:
Taxable value of perquisite in respect of interest on loan:
For April 2012- June 2012 Rs.30, 000*11%*3months = Rs.825
For July 2012- March 2013 Rs.18, 000*11%*9months = Rs.1485
Therefore, Total taxable amount = Rs.2310 (Rs. 825+ Rs.1485)
Since in this case, original loan exceeds Rs.20, 000 then perquisite value will be computed even if outstanding balance i.e. Rs. (30,000-12,000) falls below Rs.20, 000.
3) Employer gives medical loan of Rs.2, 00,000 for specified disease to employee on 1-10-2012. Employee gets insurance claim of Rs.80, 000 on 1-1-2013 but the same was not repaid to the employer.(SBI Rate 11% p.a)
Solution:
Taxable value of perquisite in respect of interest on loan:
For Oct 2012- Dec 2012 Rs. Nil
For Jan 2013-Mar 2013 Rs. 80,000*11%*3months = Rs.2200
Since, in this case amount under medical insurance scheme is not reimbursed to the employer then Rs.2200 will be taxable in the hands of employee.
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