India: Taxing concessional loans made by bank, to employees

India: Taxing concessional loans made by bank

The KPMG member firm in India has prepared reports about the following developments (read more at the hyperlinks provided below).

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  • Valuation of concessional loans made by bank to employees: The Income-tax Act, 1961 seeks to impose tax on benefits provided to employees, by employers, as salary income and also provides valuation rules. One such specified benefit is a loan granted at a concessional rate of interest, the value of which is computed as the difference between the rate of interest charged by the State Bank of India (SBI) on a specified date for the same purpose and the rate of interest at which the loan was granted by the employer (if lower than the SBI rate). The Madras High Court held that this valuation methodology does not create a “hardship” and that the concessional rate of interest is subject to tax. The case is: All India Union Bank Officers Federation. Read a June 2016 report [PDF 349 KB]
  • Equalisation Levy Rules, 2016:  The Central Board of Direct Taxes issued the Equalisation Levy Rules, 2016, to establish the compliance procedure to be followed for such levy, effective 1 June 2016. Read a May 2016 report [PDF 248 KB]
  • Transfer of shares on deferred basis: Transactions involving the acquisition of shares may include an agreement between the parties to defer the payment of the whole or part of the consideration. Recognising the need to facilitate such market practice, the Reserve Bank of India has permitted transfer of shares between a resident buyer and a non-resident seller or vice-versa on a deferred basis. Read a May 2016 report [PDF 312 KB]

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