Loan taken by Employee

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KAMAL SETHI (Querist)
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24 February 2010 An employee takes a loan / Salary Advance of Rs. 2 Lac now which will be adjusted against his future monthly salaries @ Rs. 20000/- from April 10 onwards. What will be the tax applicability of this ? Is the amount of Rs. 2 Lac will be considered employee' taxable income in this year F.Y. 2009-10 (when the amount will be paid to employee)? Is their any difference of taxability in case of loan & Salary Advance ? Kindly reply.

CMA. Dinesh S Adhikari, ACMA

CMA. Dinesh S Adhikari, ACMA (Expert)
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24 February 2010 In case of Loan:- Here Loan amount will not be taxable in the year of receiving(i.e. 2009-10), however it will be taxable when you will receive your salary and no exemption will be available to you on repayment on this Loan amount.
As far as question of taxability, here only that interest rate will be taxable on which NOT CHARGED by your employer to you and comparison will be with SBI interest rate as on date 1-april-2009. Computation of taxable Interest will be as per "Maximum outstanding Balance".

In case of Advance Salary:- In this case, this amount will be taxable in which year you receives that amount, as advance salary and no any other amount will be taxable.

Regards!!!
Dinesh S. Adhikari