The Supreme Court has given a solid blow to lakhs of bank employees. The Supreme Court has said in a recent decision that bank employees are liable to pay tax on the facility of loans provided to them at a concessional rate or without interest by their employer banks. This means that bank employees must now 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 banks especially give this facility to bank employees, who get loans either at low interest or without interest. According to the court, this unique facility is available only to bank employees. The Supreme Court termed these fringe benefits or amenities and said such loans become taxable.
Bank Unions Had Given Challenge
The organizations of bank employees had challenged a rule of the Income Tax Department in the Supreme Court, under which the loan facility available exclusively 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. Perks are those facilities that any person gets in addition to their salary due to their work/job.
Income Tax Department’s Stand Is Correct
Employees’ unions and officers’ associations of various banks had challenged the legality of the relevant provisions of the Income Tax Act and Income Tax Rules in the Supreme Court. However, in its hearing, the Supreme Court accepted the Income Tax Department’s stand as correct.
Supreme Court Gave This Order
The Supreme Court bench of Justice Sanjeev Khanna and Justice Dipankar Dutta said that banks’ loan facility to their employees at low or no interest is linked to their current or future employment. In such a situation, it gets included in the facilities provided to the employees apart from salary and can be considered a perk. This means this facility becomes taxable per the relevant income tax rules. The bench also approved using SBI’s prime lending rate as a benchmark for tax calculation.
