How to solve interest problem in perquisite

CA.ViVeK M ACA (ACCOUNTS DEPARTMENT) (28544 Points)

23 March 2011  

In computing the value of benefit or amenity, any amount paid or recovered or borne by the employee or any member of the house hold shall be reduced and the balance amount shall be charged to tax as perquisite in the hand of employee.

 

1)   Interest Free housing loan

 

The value of benefit or amenity on account of interest free or concessional loan made available to him shall be determined as a sum equal to the interest computed at the rates charges by SBI as on the first day of the relevant previous year in respect of loan made to the similar purpose during the first day of the relevant previous year.

 

              SBI schedule for AY 2011-12 is as follows

     

 

Nature of loan

periods

Rate

Housing Loan

0 to 20 years

8%

car

0 to 7 years

8%

Education

Up to 4 lakh

11.25%

 

Above 4 to 7.5 lakh

12.75%

 

above 7.5

11.75%

Personal loan

 

16%

Two wheeler

 

15.75%

 

Interest shall be calculated on the basis of maximum monthly outstanding balance.

 

Application of the above concepts

 

1)    The loan may be availed at concessional rate of interest. The difference between SBI Rate and rate in which loan was availed shall be perquisite as far as the assessee is concerned.

2)    If the problem consists of Rate of interest and EMI details and principle details then you have to apply the concepts of maximum monthly outstanding balance during the previous year only.

3)    Maximum monthly outstanding balance means the maximum principle amount which is remains outstanding during the previous year. Interest should be calculated on outstanding principle amount.

4)    Interest rate should be applied both the rate at which loan was availed from the employee and SBI rates. This means you have to calculate the maximum monthly outstanding balance of two interest rates.

Example no 1

 

Where the EMI details are missing

 

Mr X availed a personal loan of Rs 5, 00,000/- on 1/10/2010 with interest rate of 10 %. What is the value of perquisite in his case?

 

Solution

 

 

You have just Check Two points here

1. Whether the loan was availed in-between the previous year if so take the fraction periods in to the consideration.

2. Whether the EMI details are missing.

 

The loan was availed during the mid of the financial period and question does not contain the EMI details. The value of perquisite will be as follows.

 

5, 00,000/-*(16%-10%)*6/12= Rs 15,000/-

 

2. in case where EMI details are available.

 

Mr X availed a personal loan of Rs 5, 00,000/- on 1/10/2010 with interest rate of 10 %. The loan is required to be paid over a period of 3 year and monthly EMI where Rs 16,134/- First EMI falls due on end of the month and which will be recovered from his monthly salary. What is the value of perquisite in his case?

 

You have to do the following.

Calculate what the principle amount outstanding is on each month. Loan taken less Principle portion of EMI.

 

Calculate the monthly interest on outstanding balance.

 

Interest As per Employee Rate @ 10%

 

 

Month

Loan At Begin

EMI

Principle

Interest

Outstanding Balance

October

500000

16134

11967.33

4166.67

488033

November

488033

16134

12067.06

4066.94

475966

December

475966

16134

12167.62

3966.38

463798

January

463798

16134

12269.02

3864.98

451529

February

451529

16134

12371.26

3762.74

439158

March

439158

16134

12474.35

3659.65

426683

 

 

 

 

23487.4

 

           
 

Interest Rate Prescribed By SBI @ 16%

   

Month

Loan At Begin

EMI

Principle

Interest

Outstanding Balance

October

500000

16134

9467.333

6666.67

490533

November

490533

16134

12046.23

4087.77

478486

December

478486

16134

12146.61

3987.39

466340

January

466340

16134

12247.83

3886.17

454092

February

454092

16134

12349.9

3784.1

441742

March

441742

16134

12452.82

3681.18

429289

 

 

 

 

26093.3

 

           
           
 

Calculation of taxable perquisite

   
           
 

Inerest As per Option 2

26093.28

   
 

Interest As per otion 1

23487.36

   
 

Perquisite

 

2605.917

   

You have to apply the same principle in the other questions in the nature of loan.

 

All the interest calculations was done on what is the amount which is outstanding in each of the month.