Friends
An employee has been given Rs 100,000 advance for marriage. It will be adjusted against monthly salary @ 10,000 per month.
Will this be treated as perquisite ? If so, how the interest will be calculated so that it is taxable in the employee's hands ?
Would the answer be different if it would have been a loan ? And if it was for a medical purpose, then ?
Please share your thoughts.
Regards,
It is advance against salary, not perquisites.
It will be treated as a loan paid to the employee, and will be recovered by deducting Rs. 10,000/- every month from the salary.
The value of perquisite shall be calculated as correctly mentioned by MR. Praveen above. However, I would like to correct the limit mentioned. As mentioned in rule - 3 wherein loan given interest free or at concessional rate, if the loan is given for medical treatments as mentioned in rule 3A then it will not be taxable as perquisite irrespective of the amount of loan. In the same way, if the loan is for any other purpose and original amount of loan does not exceed20,000/- then also it will not be taxable. However, if the original loan amount exceeds20,000/- then interest difference as mentioned by Mr. Praveen will be taxable as perquisite irrespective of the loan amount outstanding on 1st April.
Kindly correct me if I am wrong.
I have attached rule - 3 herewith for your ready reference. Kindly read point no. 7.
Praveen and Neil
Thank You. Rule 3A speaks of loan. If the employer company treats the facility offered to employee as advance will the position change. I appreciate that the difference of the two is really very thin and has been subject matter of disputes in various laws / forums.
Regards,
Evenif company treats it as advance and same is recoverable on monthly basis it will be considered as loan only.
Yes I agree with Neil, even though it is termed as advance actually it is in the nature of loan.
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