Employer loans · perquisite
Interest-free or concessional loan
The interest you did not pay is a perquisite, measured against a benchmark lending rate.
How the taxable value is determined
Benchmark rate as on the first day of the year minus the rate actually charged, applied to the maximum outstanding monthly balance. No perquisite arises where aggregate loans do not exceed Rs 2,00,000 (raised from Rs 20,000 by the Income-tax Rules, 2026), or for loans for medical treatment of specified diseases.
Regime availability
- Old regime
- Prescribed value applies
- New regime
- Prescribed value applies
Documentation to keep
Loan sanction letter, amortisation schedule, and the benchmark rate used.
Legal basis: Income-tax Rules, 2026 (earlier Rule 3(7)(i), 1962)
Frequently asked questions
Is interest-free or concessional loan taxable in India?
The interest you did not pay is a perquisite, measured against a benchmark lending rate. Benchmark rate as on the first day of the year minus the rate actually charged, applied to the maximum outstanding monthly balance. No perquisite arises where aggregate loans do not exceed Rs 2,00,000 (raised from Rs 20,000 by the Income-tax Rules, 2026), or for loans for medical treatment of specified diseases.
Does the exemption apply under the new tax regime?
Under the old regime this treatment is not applicable — the value is prescribed, not exempted; under the new regime it is not applicable — the value is prescribed, not exempted. Legal basis: Income-tax Rules, 2026 (earlier Rule 3(7)(i), 1962).
What records should I keep for interest-free or concessional loan?
Loan sanction letter, amortisation schedule, and the benchmark rate used.
Related tools & guides
Reflects provisions in force for FY 2026-27; verify against the latest government publications (incometax.gov.in). Information, not tax advice.