Valuation of perquisite – Interest free loan or loan at concessional rate of interest provided to the employee

If Interest free or concessional loan is given to an employee (or to any member of his household) is chargeable to tax as a perquisite to the employee. Interest on such loan will be calculated at the rate charged by the State Bank of India per annum as on the 1st day of the previous year in respect of the loans advanced by it for the same purpose. This rate shall be applied to the maximum monthly balance outstanding. The maximum monthly balance outstanding means the amount outstanding on the last day of each month. Accordingly the rates to be charged are:

Purpose Applicable Rate as on April 1 2010 for the assessment year 2011-2012
Housing loan Upto 5 Years 8%
Above 5 Years but upto 10 Years 8%
Above 10 Years but upto 15 Years 8%
Above 15 Years but upto 20 Years 8%
Car loan, for new car Upto 3 Years (Rs. 7.5 lakhs & above) 8%
Upto 3 Years (Below Rs. 7.5 lakhs) 8%
Above 3 Years but upto 5 Years 8%
Above 5 Years but upto 7 Years 8%
Two wheeler loan 15.75%
Education loan Loan amount upto Rs. 4 lakhs 11.25% *
Loan amount above Rs. 4 lakhs 12.75% *, 11.75% *,#
Personal loan 16%
Loan to employees to subscribe ESOP 14%

*SBI Scholar Loan Scheme: 10.25%, 0.5% concession for girl student in case of SBI Scholar Loan Scheme

#Above Rs. 7.5 lakhs

Further, the amount of perquisite shall be reduced by the amount of expenses reimbursed by the employee. For this purpose member of household means:

  • Spouse
  • Children and their spouses
  • Parents
  • Servants and dependents

But, perquisite shall not be taxable if:

  • Loan is taken for medical treatment of specified diseases (The exemption is not available on so much of loan as has been reimbursed to the employee under medical insurance scheme) or
  • If the original loan does not exceed Rs. 20,000.

Tax Returns for Financial Year 2010 -11 (March 2011) has started.  Just mail us Form16/ Salary Certificate and details of other income, at . We would take it from there to file your return of income. provides complete online taxation solutions for individuals ( Tax Returns + Tax Support + Tax Planning ) – please see this – Services Offered. Providing Complete Online Tax Solutions for Individuals, Not Just Returns .

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