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Explained: Received an interest-free loan money from employer? Know what this special benefit means; when it is taxable
Mint 1 hr ago·25 Oct 2026, 11:47 am
An interest-free or low-interest loan from an employer is a common perk that can have tax consequences. The tax department views this benefit as a form of income, meaning the value of the interest you didn't pay is taxable. The taxable amount is calculated based on the difference between the interest rate the employer charges and the official rate set by the government. For example, if your loan is for ₹50,000 and the government rate is 6%, the tax is levied on the interest that would have accrued at that rate.
To ease the tax burden, the Income Tax Act provides specific exemptions. Loans up to ₹20,000 are fully exempt from tax, regardless of the purpose. Additionally, loans taken for medical treatment of self, spouse, children, or parents are also exempt, provided the interest rate does not exceed the prescribed limit. Investors should check their Form 16 or salary slips to see if this benefit has been added to their taxable income.
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