Valuation of Interest free/ concessional loan to employee – SBI Interest rate on 01.04.2011 for computing Perquisite Value
- Wednesday, January 25, 2012, 8:56
- Income Tax
- Articles, Featured
Interest free or concessional loans- Rule 3(7)(i) – It is common practice, particularly in financial institutions, to provide interest free or concessional loans to employees or any member of his household. The value of perquisite arising from such loans would be the excess of interest payable at prescribed interest rate over interest, if any, actually paid by the employee or any member of his household. The prescribed interest rate would now be the rate charged per annum by the State Bank of India as on the 1st day of the relevant financial year in respect of loans of same type and for the same purpose advanced by it to the general public. Perquisite value would be calculated on the basis of the maximum outstanding monthly balance method. For valuing perquisites under this rule, any other method of calculation and adjustment otherwise adopted by the employer shall not be relevant.
However, small loans up to Rs. 20,000/- in the aggregate are exempt. Loans for medical treatment specified in Rule 3A are also exempt, provided the amount of loan for medical reimbursement is not reimbursed under any medical insurance scheme. Where any medical insurance reimbursement is received, the perquisite value at the prescribed rate shall be charged from the date of reimbursement on the amount reimbursed, but not repaid against the outstanding loan taken specifically for this purpose.
Calculation of Value of Interest Free Loan
Any loan given free of interest or concessional interest shall be a taxable perquisite and calculated as follows:
• Interest calculated at the rate charged by State Bank of India as on 1st day of previous year on loan for the same purpose. This is to be calculated on maximum outstanding monthly balance.
• Less actual interest paid by employee.
Exceptions
• Loan upto Rs. 20,000.
• Loan for medical purposes for prescribed diseases
Steps to calculate value of Perquisite
Step 1 : Calculate maximum outstanding monthly balance at the end of every month
Step 2 : Find out rate of interest charged by SBI as on 1st April of previous year in case of similar loan
Step 3 : Calculate interest on amount as per Step 1 @ Rate as per Step 2 for each month
Step 4 : Total of interest for the year as per Step 3
Step 5 : Less : Interest charged from employee
Step 6 : Balance amount is the value of perquisite in respect of interest free / concessional loan
State Bank of India: Interest Rates on 1st April, 2011 For the purpose of computing perquisite valuation
Interest rates as on 1st April, 2011 on various loans in Personal Segment advances are as under –
| 1. Home Loans | |||||
| Loan amount | Upto Rs.30 lacs | Above Rs. 30 lacs to Rs. 75 lac | Above Rs.75 lac to Rs.5 Cr. | Above 5 cr. | |
| Interest rate during 1st year | 8.75% . | 8.75% . | 10% | 10.25% | |
| Interest rate during 2nd & 3 rd year | 9.50%. | 9.50% | 10% | 10.25% | |
| Interest rate from 4th year onwards | 9.75% | 10.00% | 10% | 10.25% | |
| 2. Car Loans | |||||
| Loan amount | Below Rs.5 lacs | Rs.5 lacs and above | |||
| Interest rate during 1st year | 9.25% p.a. | 9.25% p.a. | |||
| Interest rate during 2nd & 3 rd year | 10.25% p.a. | 10.25% p.a. | |||
| Interest rate for 4th & 5th year | 11.25% | 11.00% | |||
| Interest rate for 6th & 7th year | 11.25% | 11.00% | |||
| Used Cars | |||||
| Up to 3 years | 15.50 % | ||||
| Above 3 years and upto 7 years | 15.75 % | ||||
| 3. Two wheeler | |||||
| Upto 3 years | 16.50% | ||||
| 4. Education loans | |||||
| SBI Student Loans* | upto Rs.4 Lac – 12.00%Loans above Rs.4 Lac and upto 7.50 lacs – 13.50%Loans above Rs.7.5. Lac- 12.5% | ||||
| 5. Personal loans | |||||
| Xpress credit (Demand Loan) | 13.25% TO 15.25% | ||||
| Xpress credit (Overdraft) | No Overdraft | ||||
| SBI Saral | 16.75% | ||||
| 6. Loans against NSCs/KVPs/RBI Relief Bonds/Surrender value of SBI Life/LIC/SBI Magnums etc. | |||||
| Upto 3 years | 12.75% | ||||
| More than 3 years and upto 6 years | 12.75% | ||||
| 7. Loans against Gold Oranaments | Upto Rs.1 lac:12.50%Above Rs.1 lac:13% | ||||
* 0.50% additional concession for girl students w.e.f. 02.03.2009
Related posts:
- State Bank of India: Interest Rates on 1st April, 2011 – For the purpose of computing perquisite valuation
- Where employer bank has given loan to employees at rate of interest lower than SBI lending rate, value of concessional loan is taxable as perquisite
- Tax paid by the employer on behalf of the employee is perquisite and can not be included in salary for valuation of concessional accommodation
- Interest Rate started going up, ICICI bank raised Interest rate on Home and Auto Loan
- HDFC bank announced teaser interest rate of 8.25 Percent for first year on home loan
what if nature of loan not known at the time of calculating the perquisite for interest free loan?
Can u plz explain the working of Maximum Outstanding Monthly Balance method.
I have just heard from the economics report on Channel 5 that the recent poor jobs report has sent down the interest rates. What is your thoughts on this? Will a bad economy really be good news for the price of credits? I would be really glad if you could explain it for me because I am struggling with loan problems on a daily basis.
Can I also let you know that I believe everyone must be aware of the evil gangs of lenders that is a problem for people in many other places. It is like this because many poor individuals only got access to expensive credit. This is a really big problem in Thailand where rice farmers many times are in the hands of gray market loan sharks which many times end with a suicide. One solution could be to force the mainstream banks to give loan to these people with the backing of the state. Have anyone some ideas on this plan?
Thank you