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 of diseases 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.


• 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, 2016
For the purpose of computing perquisite valuation

Interest rates as on 1st APRIL, 2016 on various loans in Personal Segment advances are as under

1 year MCLR RATE: 9.20 %
2 year MCLR RATE: 9.30%

MCLR RATE : 09.20 %
Borrowers’ category Home Loan interest rate, irrespective of loan limit
Women 20 bps above the one year MCLR of 9.20 % i.e 9.40% p.a.
Others 25 bps above the one year MCLR of 9.20% i.e.9.45% p.a.
SBI Student Loan Scheme
SBI Student Loan*  (Floating Interest Rate linked to 1 year MCLR with 1 year reset)
For loans uptoRs 4 lac 2%above 1 year MCLR i.e., 11.20%
Above Rs 4 lac and uptoRs 7.50 lac 2% above 1 year MCLR i.e., 11.20%
Above Rs 7.50 lac 1.75% % above 1 year MCLRi.e.,10.90%
* for Girl Student 0.50% concession in interest rate
Loan against pledge of Gold Ornaments
2%above 1 year MCLR with 1 year reset, currently11.20% p.a. (floating)
Loan against NSCs/ KVPs/ RBI Relief Bonds/ Surrender value of SBI Life/ LIC/ SBI Magnum etc.
4.50%above 1 year MCLR with 1 year reset i.e., 13.70%(floating)
Scheme Name Tenure Interest rate
For Men For Women
SBI Car Loan Scheme For All Tenure 0.60% above 1 year MCLR i.e. 9.80% p.a. 0.55% above 1 year MCLR i.e. 9.75% p.a.
SBI Combo Loan Scheme For All Tenure 0.60% above 1 year MCLR i.e. 9.80% p.a. 0.55% above 1 year MCLR i.e. 9.75% p.a.
NRI Car Loan For All Tenure 0.60% above 1 year MCLR i.e. 9.80% p.a. 0.55% above 1 year MCLR i.e. 9.75% p.a.
Certified Pre-owned car loan For All Tenure 4.00% above 1 year MCLR i.e. 13.20% p.a.
SBI Loyalty Car Loan Scheme Car Loan, Combo Loan, NRI Car Loan 0.50% above 1 year MCLR i.e. 9.70% p.a. 0.45% above 1 year MCLR i.e. 9.65% p.a.
Certified Pre-owned Car Loan Scheme , Used Car Loan Scheme 1.80% above 1 year MCLR i.e. 11.00% p.a. 1.75% above 1 year MCLR i.e. 10.95% p.a.
Super Bike Loan Scheme For All Tenure 3.00% above 1 year MCLR i.e. 12.20% p.a.
Scheme Name Check Off Rate of Interest*
Xpress Credit Full Check-off
(Category I)
3.30% – 3.80% above 2 year MCLR i.e., 12.60% – 13.10% p.a. currently
Partial Check-off
(Category II)
4.30% – 4.80% above 2 year MCLR i.e., 13.60% – 14.10% p.a. currently
No Check-off
(Category III)
5.30% – 5.80% above 2 year MCLR i.e., 14.60% – 15.10% p.a. currently

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15 responses to “Valuation of Interest free/ concessional loan to employee- SBI Interest rate on 01.04.2016”

  1. preeti ranjan says:

    what should be the starting month for calculation of perquisite? Is it Loan disbursement month or Monthly installment deduction month?

    • Manish says:

      If Company gives the interest free loan to its employee. will there any liability arise on the company under income tax?

  2. Ajay Singhal says:

    What would be the interest rate to be used for Perq valuation on the interest free loan given by Company to employee
    a) for the purpose of buying commercial property.
    b) on loan for personal usage purpose

  3. mansi bidgar says:

    How to Calculate maximum outstanding monthly balance at the end of every month as stated in step 1 of valuation of perquisite?

  4. savitha says:

    hello sir i need 0% lone how to tk its is possible

  5. Manish says:

    Kindly clearify
    1. Concessional Jewel loan provided by banks is personal loan?

    2. Whether it will be added in perqusite valuation in rule 3?

    3. Employer is responsible for deduction tax on such concessional loan?.

  6. anil kumar says:

    for the purpose of the perquisites how would we treat two housing loan availed one at 10.00 % & another at 11.25 % for purchase of single dwelling unit i.e. one house, where the ROI in one case is below SBI rate & others is higher, please explain the calculation

  7. reye says:

    what if assesse takes loan on 1.march.2012…

  8. Anup says:

    I have query on Concessional home loan provided by company. As per rule, the differential interest amount will attract perquisite tax, question is can we also claim the Home Loan benefit on such loan i.e 150000 interest and 1 lacs Principal benefit under Sec 80 C ?

  9. Jordan Maxwell says:

    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

  10. Nitin S Bhat says:

    Can u plz explain the working of Maximum Outstanding Monthly Balance method.

  11. Nisha says:

    what if nature of loan not known at the time of calculating the perquisite for interest free loan?

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