Limit on housing loan from employer

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Ram

42 Points Joined January 2015

Hello,

Regarding a housing loan from the employer to employee, I understand that if the employer charges no interest, the savings (compared to SBI's rate) will be treated as perquisite in the hands of the employee.

My questions:

a) Is there an upper limit on the housing loan amount?

b) I read that the interest payment is eligible for employee tax deduction (upto limit of Rs.2 lakhs), just like a bank loan. For an unlisted pvt. ltd. company, is this still true? What paperwork must be provided to support this?

c) If the employer charges interest at SBI rates, how will employer report this? Is it considered taxable income for the employer?

Thank you.

Replies (2)

CA Ragini

405 Points Joined February 2011

When your employer provides you or any member of your household, an interest free loan or a loan at a concessional rate – it is chargeable to tax as a perquisite. It may be specified as ‘an interest free or tax free’ loan when disbursed– however it shall be taxable as part of your salary. Method of calculation – 1.Find out aggregate outstanding balance for the loan (for all the loans if more than one) as on the last day of each month. 2. Find out the Interest charged by SBI as on the 1st of April (of the same year in which the loan has been given) – for a loan SBI would give for the same purpose. 3. Calculate interest for each month of the year on the outstanding amount in the 1st step at rate of Interest given in the 2nd step. 4. From the total interest as calculated above deduct interest recovered from you by the employer, if any. This balance amount is the taxable value of the perquisite.

Arif Ali

Apt Co Advisory

1230 Points Joined June 2009

1. No any limit

2. This is eligible to take the dedcution under section 80C(for principal amount only in case of self occupied property) and 24(b) (for inteest portion)

You must go to a loan agreement regard this

3. the interest received by company is the income under the head of other sources.

otherthing are well known by you.