Personal Loan from Employer

Tax Glossary Definition

Personal Loan from Employer

A loan provided by an employer to an employee is considered a perquisite under § 17(2) of the Income Tax Act when the loan is interest-free or provided at a concessional interest rate. The amount of interest that would have been payable at the prevailing market rate is treated as a taxable benefit and added to the employee’s salary income.

Example: An employee receives a loan of ₹1 lakh from their employer without any interest. The notional interest (what would have been charged at a normal rate) is treated as a taxable perquisite

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