Interest Free Loan

The interest-free loan from employer taxable: ITAT 

Interest-free loans extended by the employer are taxed by an employee as a specialist, according to the Court of Appeal for Income Tax (ITAT).

However, the assessment of the taxable or valuable benefit, which forms part of the employee’s salary income, cannot be performed in an ad hoc manner and must be calculated in accordance with the formula established under the Income Tax Act, the arbitral tribunal stated.

The interest-free loan from employer taxable: ITAT

During the evaluation for the 2010-2011 financial year, her argument declined that there was no relationship between the employer and the employee because the company had deducted the tax at source or TDS on a salary of $ 24 to pay.

Thus, the I-T evaluator assesses the interest rate of 15% on the loan and the addition of 43.8 thousand rupees to its income as a great value for the loan without interest.

In the next phase of the appeal, the I-T Commissioner (Appeals) considered that the I-T Officer had treated the interest-free loan value as a taxable expense in the hands of the employee. However, he pointed out that the evaluation could not be done in an ad hoc manner.

The company must include the loan amount during the TDS calculation

In accordance with the rules of the I-T Act, the outstanding value is based on the price to be borne by the SBI on 1 April of the fiscal year in which the staff member receives the loan.

The Commissioner revoked the valuation and reached a value of 20.65 rupees. The appeals commissioner also rejected Saraf’s objection that since the interest on the loan granted to it had already been rejected by the company, it could not be treated as a precondition in its hands. Not satisfied with the result, Saraf made an appeal with ITAT. However, in their order dated May 16, ITAT endorsed the Commissioner’s Order (Appeals).

In the context of interest-free loans from employers, Puneet Gupta, Director of People’s Advisory Services at Ernst and Young, said: “The employer is responsible for treating an interest-free loan as a tax expert and TDS is deducted from the salary. Specific diseases or when the loan amount is trivial and does not exceed 20,000 rupees. ”

Employees should make sure that the employer deducts TDS from the total salary income, which includes the outstanding value of interest-free loans, if the TDS is not deducted, the employee faces several consequences and not only has to pay income tax on the outstanding value of the loan, In addition, if the appropriate IT tax amount is not reported, the IT department may impose a fine of between 50% to 200% of the income tax that has not yet been reported .

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Certicom Consulting [ Kedia Arpana & Co ] is a group of Chartered Accountants in the business of Small Business Setup & Statutory Compliance including for Professionals for the past 15 years. We have been an established and popular company with an excellent track record for the best customer satisfaction.

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Certicom Consulting

Certicom Consulting [ Kedia Arpana & Co ] is a group of Chartered Accountants in the business of Small Business Setup & Statutory Compliance including for Professionals for the past 15 years. We have been an established and popular company with an excellent track record for the best customer satisfaction.