The apex court ruled that zero-interest loans offered to employees of private-sector banks by their employers would be taxable as per Section 17(2)(viii) of the Income Tax Act and 3(7)(i) of I-T Rules. A bench comprising justices Sanjiv Khanna and Dipankar Datta explained that the savings enjoyed from such concessional or low-interest loans are “unique” and will come under ‘other fringe benefit or amenity’, which is a perquisite that attracts tax.
It is pertinent to mention here that fringe benefits include benefits such as tuition support, life insurance, end employee discounts, that is, perks that companies grant to their staff members in addition to the normal salary. And such fringe benefits, including bonuses or reimbursements ge benefits such as bonuses or cash reimbursements are likely to be subject to income tax.
While the unions and officers’ associations argued against the rule, the Court maintained that such savings were enjoyed by the employees because of their job and only due to their status of being employees of the establishment/bank. Moreover, these savings/benefits were being enjoyed in addition to the salary they were earning. Therefore, they were definitely a perquisite, which is taxable.
Therefore, the appeals made by the unions and associations that challenged Rule 3(7)(i) of the Income Tax Rules, 1962 and Section 17(2)(viii) of the Income Tax Act, 1961, were dismissed by the Supreme Court.
