Tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 February 2012 An employee has taken loan from his employer. Loan will be repaid in EMI mode & this amount shall be deducted from employee monthly salary. Will Employer deduct TDS at the time of issuance of loan to employee, if -

I. Loan to employee is provided without any interest charges

II. Interest will be levied

Kindly reply along with relevant IT section(s) & other suitable comments, if applicable.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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02 February 2012 Liability of deducting TDS in case of payment of interest has been kept upon the payer. Employer is receiver of the income, so question of TDS will not arise.
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Querist : Anonymous

Querist : Anonymous (Querist)

02 February 2012 Thanks sir for your prompt reply. Leaving interest matter aside, kindly explain whether employer will deduct TDS while issuing (payment) Loan to his employee or not.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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02 February 2012 Loan given to the employer to employee under concessional rate or interest free loan except following cases

where the original Loan(s) amount does not exceed in aggregate20000/-.This rule exempted only original amount up to 20000 but if loan if original loan is more than 20000 but present loan outstanding is less than 20000 then there is no exemption available and perquisite remains taxable.
if the loans made available for medical treatment (for disease specified ) then there will no perks value ,However the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme

Treatment

The valuation will be done the basis of interest charged by State Bank of India on first day of relevant previous year .the rate of SBI as on applicable .So if Loan to employee or his household is provided at a rate less than SBI rate on first day of the previous year then the difference of interest will be charged as perquisite in hands of employee.So if the Interest rate on which loan is provided is more than Rate charged by SBi on relevant date ,then valuation of the perquisite will be nil.Process to calculate the perks value is Given below.

Find Out the Maximum outstanding monthly balance For each loan on the last day of each month.
Find Out the rate of interest Charged by the SBI on that type of loan on the first day of relevant previous year
Calculate interest on amounts given in (1)for the full financial year above @ rate of SBI as per (2) above and deducte interest recovered from the employee.
The balance will be taxable as perquisites in hand of employee.

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