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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

Interest on Loan given by Employer to Employee  - Taxability of Perquisites

 

  • 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

--answer--

Not Taxable as loan amount upto 20000

--endanswer--

 

 

b.Personal Loan of 100000 for Daughters Marriage

--answer--

Taxable as amount greater than 20000

--endanswer--

 

c.Medical Loan for specified disease of son of 100000

--answer--

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

--endanswer--

 

 

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

--answer--

Taxable as it is not for specified diseases

--endanswer--

 

 

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

--answer--

Not Taxable as loan amount upto 20000

--endanswer--

 

Q2

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

Rate of Interest=10% as per SBI as on 1st 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?

--answer--

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

--endanswer--

 

 

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

---answer--

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 

--endanswer—

 

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com.
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