As Per Income Tax Act 1961 “Value of interest free loan/concessional loan” includes:
i) The value of the benefit to the Assessee resulting from the provision of interest-free or concessional loan for any purpose
ii) Made available to the employee or any member of his household during the relevant previous year by the employer or
iii) The rate of interest shall be the rate charged per annum by the State Bank of India as on the 1st day of the relevant previous year.
iv) In respect of loans for the same purpose advanced by it on the maximum outstanding monthly balance as reduced by the interest,
v) If any, actually paid by him or any such member of his household.
However loan amount not exceeding 20000Rs. in aggregate are exempt. Loans for medical treatment specified in Rule 3A are also exempt provided the amount is not reimbursed under any medical insurance scheme.
Reference:
As Per Rule 3(7)(i), Of the Income Tax Act, 1961-
Rule 3.
For the purpose of computing the income chargeable under the head “Salaries”, the value of perquisites provided by the employer directly or indirectly to the Assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in accordance with the following sub-rules,—
(7) In terms of provisions contained in sub-clause (viii) of clause (2) of section 17, the following other benefits or amenities and 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 by 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:
Provided that 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 twenty thousand rupees:
Provided further 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.