Interest free loan

RULE 3(7) OF INCOME TAX RULES STATES AS UNDER: (7) In terms of provisions contained in sub-clause (vi) of sub-section* (2) of section 17, the following other fringe benefits or amenities are hereby prescribed and the value thereof shall be determined in the manner provided hereunder: (i) The value of the benefit to the assessee resulting from the provision of interest-free or [concessional loan for any purpose made available to the employee or any member of his household during the relevant previous year by the employer or any person on his behalf shall be determined as the sum equal to the interest computed at the rate charged per annum 75by the State Bank of India, constituted under the State Bank of India Act, 1955 (23 of 1955), as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced by it] on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household. However, no value would be charged if such loans are made available for medical treatment in respect of diseases specified in rule 3A of these Rules or where the amount of loans are petty not exceeding in the aggregate Rs. 20,000 : Provided that where the benefit relates to the loans made available for medical treatment referred to above, the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

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