Interest free or concessional loan is taxable in India

Interest free or concessional loan is taxable in IndiaMany companies in India are providing interest free or concessional loan to their employees or to the members of employee’s household for purchase of various assets like computer, vehicle etc or for various household expenses like medical, Marriage or education.

As per the provisions of income tax act and rules these amounts as incurred by employer for the benefit of employees will be treated as perquisite and accordingly will be charged to income tax in the hands of employee.

Such value of perquisite will be determined as the sum equal to the interest computed at the rate charged per annum by SBI as on the first day of the relevant previous year in respect of loans for the same purpose advanced by it. Such interest amount as derived will be reduced by the amount recovered from employee towards such loan. 

While calculating the value of perquisite the interest amount should always be calculated on the maximum outstanding monthly balance of the loan i.e. outstanding balance as on the 1st day of each month.

Interest free or loan at concessional rate is not taxable in following cases

  • Interest or loan at concessional rate provided for medical treatment of diseases as specified in rule 3A will not be taxable in the hand of employee. If employee gets reimbursed for medical treatment under any medical insurance scheme then such exemption will not be available.
  • If the loan amount is less than or equal to Rs. 20, 000 then interest on such amount will not be taxable as perquisite.

SBI loan Lending or Interest rate

Types of loan Particulars Interest rate
Housing Loan amount up to Rs. 30 lakhs 10.75%
Housing Loan amount up to Rs. 30 lakhs to 75 lakhs 11%
Housing More than 75 lakhs 11.25%
Car Term Loan 11.25%
Car Overdraft 11.75%
Education Up to Rs. 4 lakhs 13.5%
Education 4 lakhs to 7.5 Lakhs 13.25%
Education Above 7.5 lakhs 12%
Personal 18.5%
Two wheelers 18.25%

If any education loan has been provided for the education of a girl student then concession at the rate of 0.5% are provided from the interest rate of the loan amount.

2 thoughts on “Interest free or concessional loan is taxable in India

  1. Sunil Dhobale

    I am employee and I have enjoyed home loan at concessional rate. But company is add in my salary income in head of perquists. Please tell me Is it taxable income ? Also please tell me this amount is benefit to me for calculation of income tax.

    Reply

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