Valuation of Interest free/ concessional loan to employee- SBI Interest rate on 01.04.2019 for AY 2020-21

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.

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, 2019
For the purpose of computing perquisite valuation

Interest rates as on 1st APRIL, 2019 on various loans in Personal Segment advances are as under

1 year MCLR RATE: 8.55 %
2 year MCLR RATE: 8.65%

A. HOME LOANS (TERM LOAN):

Revised Int I. TERM LOANS UPTO RS 30 LACS (1-yr MCLR: 8.55%)
Salaried Borrowers (%) : Non-Salaried Borrowers (%) :
Women LTV = 80 1 Year MCLR+ 15 bps, ER:8.70 1 Year MCLR+ 30 bps, ER:8.85
LTV > 80
and = 90
1 Year MCLR+ 25 bps, ER:8.80 1 Year MCLR+ 40 bps, ER:8.95
Other LTV = 80 1 Year MCLR+ 20 bps, ER:8.75 1 Year MCLR+ 35 bps, ER:8.90
LTV > 80
and = 90
1 Year MCLR+ 30 bps, ER:8.85 1 Year MCLR+ 45 bps, ER:9.00
II. TERM LOANS ABOVE RS 30 LACS AND UPTO RS 75 LACS: (1-yr MCLR: 8.55%) Rate
Salaried Borrowers (%) : Non-Salaried Borrowers (%) :
Women RG-1, 2 ,3 1 Year MCLR+ 35 bps, ER:8.90 1 Year MCLR+ 50 bps, ER:9.05
RG-4, 5, 6 1 Year MCLR+ 45 bps, ER:9.00 1 Year MCLR+ 60 bps, ER:9.15
Other RG-1, 2, 3 1 Year MCLR+ 40 bps, ER:8.95 1 Year MCLR+ 55 bps, ER:9.10
RG-4, 5, 6 1 Year MCLR+ 50 bps, ER:9.05 1 Year MCLR+ 65 bps, ER:9.20
III. TERM LOANS ABOVE RS 75.00 LACS – FLOATING RATE: (1-yr MCLR: 8.55%)
Salaried Borrowers (%) : Non-Salaried Borrowers (%) :
Women RG-1, 2 ,3 1 Year MCLR+ 45 bps, ER:9.00 1 Year MCLR+ 60 bps, ER:9.15
RG-4, 5, 6 1 Year MCLR+ 55 bps, ER:9.10 1 Year MCLR+ 70 bps, ER:9.25
Other RG-1, 2, 3 1 Year MCLR+ 50 bps, ER:9.05 1 Year MCLR+ 65 bps, ER:9.20
RG-4, 5, 6 1 Year MCLR+ 60 bps, ER:9.15 1 Year MCLR+ 80 bps, ER:9.35
CRE Home Loan
A premium of 50 bps over and above the interest rate applicable to Home Loan will be charged.

B. SBI STUDENT LOAN SCHEME

Loan Limit 1 year MCLR Spread Effective Interest Rate Reset Period
Upto Rs 7.5 Lacs 8.55% 2.00% 10.55% 1 year
Concession 0.50% concession in interest for girl students
Above Rs 7.5 Lacs 8.55% 2.25% 10.80% 1 year
Concession 0.50% concession in interest for girl students
0.50% concession for students availing of SBI Rinn Raksha or any other existing policy assigned in favour of our Bank

C. Auto Loans Interest Rates w.e.f. 10.12.2018 (Fixed Rate)

Scheme Interest Rate w.e.f. 10.12.2018 (1 year MCLR: 8.55%)
i) SBI Car Loan, ii) NRI Car Loan, iii) Assured Car Loan Scheme, iv) SME Retail Car Loan Scheme (excluding Taxi, Transport Operators and fleet segments in SME) From 9.30% to 9.80%
Loyalty Car Loan Scheme SBI Car Loan, NRI Car Loan For Men: 1.15% above 1 year MCLR i.e. 9.70% p.a.

For Women: 1.10% above 1 year MCLR i.e. 9.65% p.a.

(CIC Based rates are applicable)

Certified Pre-owned Car Loan Scheme Men: 2.25% above 1 year MCLR i.e. 10.80% p.a.

For Women: 2.20% above 1 year MCLR i.e. 10.75% p.a.

Certified Pre-owned Car Loan Scheme From 11.05% to 12.05% (CIC Based rates are applicable).
Super Bike Loan Scheme 3.25% above 1 year MCLR i.e. 11.80% p.a
SBI Two-Wheeler Loan 9.05% above 1 year MCLR i.e. 17.60% p.a.
SBI Car Loan Lite CIBIL Score Rate of Interest
>=750 2.80% above 2 Yr MCLR i.e. 11.45%p.a.
From 650 to 749 3.80% above 2 Yr MCLR i.e. 12.45%p.a.

Disclaimer: The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

(Republished with Amendments by Team Taxguru)

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18 Comments

  1. Pooja Panwar says:

    Hi
    I availed rs 28 lac loan from employer for 27 years @5% of interest on October 2018.
    What will be the pre requisites added to my salary plz calculate

  2. rajesh shetty says:

    if loan 50k availed on 18th feb 19 for renovation of home, no repayment made for FY, then for feb what’s the rate is it half of month rate or full month rate applicable.

  3. preeti ranjan says:

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

  4. 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

  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. 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 ?

  8. 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

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