Income Tax: Bank employees shock in Supreme Court, tax will have to be paid on such loan.

Income Tax

Income Tax: The Supreme court has given a strong blow to lakhs of bank employees. The apex court has said in a fresh judgment that the bank employees get tax liability on the facility of loan at a discounted rate or without interest on behalf of their employer banks. Tax Premier Court has given a strong blow to lakhs of bank employees. The apex court has said in a fresh decision that the tax liability is made on the facility of loan to bank employees at concessional rate or without interest on behalf of their employer banks.

This means that now bank employees will have to pay tax on such loans.

These loans of bank employees are unique.

The supreme court upheld the income tax rules in this regard. The apex court said that this facility is specially provided to bank employees by the banks, in which they get loans either at low interest or without interest. According to the court, this is a unique facility, which is available only to bank employees. The Supreme court termed it as fringe benefits or amenities and said that due to this such loans become taxable.

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Bank unions had challanged it.

In fact, the bank employees’ organizations had challenged a rule of the Income Tax  department in the Supreme Court, under which the loans facility given specifically to bank employees has been made taxable. Perquisites have been defined under Section 17(2)(viii) of the Income Tax Act 1961 and Rule 3(7)(i) of the Income Tax Rules 1962.Perquisites are those facility which any person gets in addition to his salary due to his work/job.

The Income Tax Department’s stand is correct.

The employees’ unions and officers’ associations of various bank had challenged the legality of the relevant provisions of the Income Tax Act and Income Tax rules in the Supreme Court. However, the supreme curt, in its hearing, considered the Income Tax Department’s stand correct.

The supreme Court pronounced this order, the Supreme Court bench of Justice Sanjeev Khanna and Justice Dipankar Dutta said-The loans that banks offer to their employees at low interest or without interest are related to their jobs till now or the job of the coming time. In such a situation, it gets included in the facilities available to the employees in addition to the salary and they can be considered as perique’s. This means that according to the rules of income tax, this facility becomes taxable. The bench also approved the use of SBI’s prime lending rate as a benchmark for tax calculations.

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