If loan is provided to an employee, then the interest on loan is taxable Perquisite.

Exception

However it is tax free when

1. Loan Amt is Small (upto 20000)
2. Loan is for treatment for specified medical diseases of self or family. Here family means Self,Spouse,Children,Children's spouse,Parents ,Servants and Dependants

• How to Calculate Interest

• SBI interest rate as on 1st  April is to be taken.For example – for 2015 -16 financial year SBI interest rate as on 1st  April 2015 to be taken.

• SBI interest is to be calculated on the maximum amount of Loan outstanding per month.
• Interest Rate on relevant loan is to be taken
• For example –If Education Loan given then interest rate on education loan of SBI to be taken and so on
• If any interest recovered from employees, then, that to be reduced while calculating taxable perquisite

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QUESTIONS

Q1 State whether followings are taxable

1. Personal Loan of 20000 for Daughter' Marriage

Not Taxable as loan amount upto 20000

b.Personal Loan of 100000 for Daughters Marriage

Taxable as amount greater than 20000

c.Medical Loan for specified disease of son of 100000

Not taxable even if amount greater than 20000 as it is for specified disease and son is covered in definition of relative

d.Medical Loan for other diseases(not specified) of son of 100000

Taxable as it is not for specified diseases

e.Medical Loan for other diseases(not specified) of son of 5000

Not Taxable as loan amount upto 20000

Q2

Employee took a loan on 10 th   April from company for daughter' marriage

Rate of Interest=10% as per SBI as on 1 st April on personal loan.

His Loan account is as follows

 DATE PARTICULARS DEBIT CREDIT CL BAL 10th April LOAN TAKEN 100000 100000 25th April LOAN REPAID 30000 70000 14th May LOAN REPAID 50000 20000 29th May LOAN REPAID 10000 10000 10th June LOAN REPAID 10000 0

What is the

Maximum Amount of loan outstanding

and

Taxable Perquisite?

 Month Maximum Amount of Loan Outstanding April 100000 May 70000 June 10000

Taxable Perquisite

Interest Computation @10% p.a

 Month Maximum Amount of Loan Outstanding No if Days Interst Rate Interest April 100000 21 10% 100000*21/365*10%- 575.34 May 70000 31 10% 70000*31/365*10%= 594.52 June 10000 10 10% 10000*10/365*10%= 27.40 Taxable Perquisite 1197.26

Q3  Suppose in previous question the Employee pays 7 % interest on Loan

Ans. 10%-7% =3% is taxable

In this case value of Perquisite will be calculated by taking

interest rate as 3% instead of 10%

 Month Maximum Amount of Loan Outstanding No if Days Interst Rate Interest April 100000 21 10% 100000*21/365*3%- 172.60 May 70000 31 10% 70000*31/365*3%= 178.36 June 10000 10 10% 10000*10/365*3%= 8.22 Taxable Perquisite 359.18