No tax exemption on concessional or interest free loan from the employer, not even for bank employees, says SC

The recent Supreme Court judgment upheld the taxation of concessional or interest-free loans provided by banks to their employees as 'fringe benefits' and 'perquisites' under Section 17 of the Income Tax Act. The ruling reaffirmed the validity of Rule 3(7)(i) of the Income Tax Rules, which calculates the taxation of such loans based on the difference between the interest charged and the prime lending rate of the State Bank of India. \r

This decision stems from the understanding that banks offer concessional rates exclusively to their employees, constituting a benefit tied to employment. While the taxation of these loans may lead to additional tax liabilities for employees, they can still save money overall due to the lower interest rates. However, the judgment did not address whether banks will continue to offer concessional rates, leaving the decision within the purview of the Reserve Bank of India's regulations.