Valuation of Interest free/ concessional loan to employee – SBI Interest rate on 01.04.2011 for computing Perquisite Value

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Interest free or concessional loans- Rule 3(7)(i) – It is common practice, particularly in financial institutions, to provide interest free or concessional loans to employees or any member of his household. The value of perquisite arising from such loans would be the excess of interest payable at prescribed interest rate over interest, if any, actually paid by the employee or any member of his household. The prescribed interest rate would now be the rate charged per annum by the State Bank of India as on the 1st day of the relevant financial year in respect of loans of same type and for the same purpose advanced by it to the general public. Perquisite value would be calculated on the basis of the maximum outstanding monthly balance method. For valuing perquisites under this rule, any other method of calculation and adjustment otherwise adopted by the employer shall not be relevant.

However, small loans up to Rs. 20,000/- in the aggregate are exempt. Loans for medical treatment specified in Rule 3A are also exempt, provided the amount of loan for medical reimbursement is not reimbursed under any medical insurance scheme. Where any medical insurance reimbursement is received, the perquisite value at the prescribed rate shall be charged from the date of reimbursement on the amount reimbursed, but not repaid against the outstanding loan taken specifically for this purpose.

Calculation of Value of Interest Free Loan

Any loan given free of interest or concessional interest shall be a taxable perquisite and calculated as follows:

• Interest calculated at the rate charged by State Bank of India as on 1st day of previous year on loan for the same purpose. This is to be calculated on maximum outstanding monthly balance.

• Less actual interest paid by employee.

Exceptions

• Loan upto Rs. 20,000.

• Loan for medical purposes for prescribed diseases

Steps to calculate value of Perquisite

Step 1 : Calculate maximum outstanding monthly balance at the end of every month

Step 2 : Find out rate of interest charged by SBI as on 1st April of previous year in case of similar loan

Step 3 : Calculate interest on amount as per Step 1 @ Rate as per Step 2 for each month

Step 4 : Total of interest for the year as per Step 3

Step 5 : Less : Interest charged from employee

Step 6 : Balance amount is the value of perquisite in respect of interest free / concessional loan

State Bank of India: Interest Rates on 1^st April, 2011 For the purpose of computing perquisite valuation

Interest rates as on 1^st April, 2011 on various loans in Personal Segment advances are as under –

1. Home Loans
Loan amount	Upto Rs.30 lacs	Above Rs. 30 lacs to Rs. 75 lac		Above Rs.75 lac to Rs.5 Cr.	Above 5 cr.
Interest rate during 1st year	8.75% .	8.75% .		10%	10.25%
Interest rate during 2nd & 3 rd year	9.50%.	9.50%		10%	10.25%
Interest rate from 4th year onwards	9.75%	10.00%		10%	10.25%
2. Car Loans
Loan amount	Below Rs.5 lacs		Rs.5 lacs and above
Interest rate during 1st year	9.25% p.a.		9.25% p.a.
Interest rate during 2nd & 3 rd year	10.25% p.a.		10.25% p.a.
Interest rate for 4th & 5th year	11.25%		11.00%
Interest rate for 6th & 7th year	11.25%		11.00%
Used Cars
Up to 3 years	15.50 %
Above 3 years and upto 7 years	15.75 %
3. Two wheeler
Upto 3 years	16.50%
4. Education loans
SBI Student Loans*	upto Rs.4 Lac – 12.00%Loans above Rs.4 Lac and upto 7.50 lacs – 13.50%Loans above Rs.7.5. Lac- 12.5%
5. Personal loans
Xpress credit (Demand Loan)	13.25% TO 15.25%
Xpress credit (Overdraft)	No Overdraft
SBI Saral	16.75%
6. Loans against NSCs/KVPs/RBI Relief Bonds/Surrender value of SBI Life/LIC/SBI Magnums etc.
Upto 3 years	12.75%
More than 3 years and upto 6 years	12.75%
7. Loans against Gold Oranaments	Upto Rs.1 lac:12.50%Above Rs.1 lac:13%

* 0.50% additional concession for girl students w.e.f. 02.03.2009