Tax Free Loan from Employer

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Purvi (Querist)

19 November 2010 In one of the case of mine, one employee takes an interest Free Loan of Rs.10 Lacs from His Employer for the purpose of Buying a House in his wife name.

Now i want to know that what is income tax implication of this transaction???

What if the employee takes loan & further transfer / gives this entire loan to his Wife, And receives interest from his wife @ 15%?? Will his wife get deduction under head income from head house property????

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)

19 November 2010 Interest free loan taken from the employer is taxed under the head "Salary" as perquisites.(SBI provides interest rate at the begining of the year) such interest amount shall be treated as perks in the hands of employee.

If you take a interest free loan from your employer & gives it to your wife at 15% pa, then you would be loosing it twice (no benefit arises or only income shifts to other person) as you will have to declare the interest income received from your wife, She can claim the interest paid while computing house property income.

Purvi

Purvi (Querist)

24 November 2010 Thanks for your reply

But i have one question,

As you mentioned the Interest free loan is taxed under the salary as perquisites at the rate of Interest prescribed by SBI. Now my question is,

This prescribed rate of Interest on loan will be charged as Income under salary every year?????? (i.e. till the time of repayment of full loan) OR Will be taxed only in the First year in which Interest free Loan is taken??????

Thanks in Advance

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)

25 November 2010 I would ask you the same in different manner, whether the company charges any interest every year or its interest freee loan through out the period of loan?
Ya...
that gives you the answer....

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