Taxation: Kuldip Kumar

Kuldip Kumar, partner and leader personal tax, PwC India, answers your questions

I'm planning an interest-free personal loan from my office for an emergency. Since the money will be credited into my salary account, will I have to pay any tax on it? Or is it better to take a personal loan, since there is no tax on it?

There is no tax on money borrowed from an employer. However, when the employer gives an interest-free loan to an employee, then the notional interest is considered taxable benefit in the hands of an employee. The notional interest is calculated by applying the interest rate the State Bank of India charges for similar loans. The value of taxable benefit is determined by applying the above rate on the maximum monthly dues loan balance as on the last day of the relevant month(s). However, if the loan granted by the employer is below Rs 20,000 or the loan is granted for medical treatment of specified diseases, no taxable benefit is considered for notional interest. Regarding your second query, taking an interest-free loan might be beneficial, as you will end up paying only the tax on notional interest. On the other hand, where you take a personal loan, you will have to pay the interest, which will obviously be more.

I've got a query from the income-tax office about my tax returns filed two years ago. I have no other income other than salary and my office has deducted tax from my salary. Why have I got the notice?

A person is liable to file the tax return where he or she has taxable income exceeding the threshold limit (currently Rs 2.5 lakh for a person below 60 years). Where an individual is ordinarily resident of India and is holding any foreign bank account or foreign asset, he or she is required to file the return, though he or she may not have any taxable income. Withholding of taxes by the employer will not relieve you from the tax filing obligation where your income exceeded the threshold. You have not mentioned under which section of the Income Tax Act, 1961, has the notice been sent to you and whether you had filed the return or not. One would need to understand and need to respond to the notice accordingly. Non-compliance with the notice might result in penal consequences and, therefore, this would need to be attended to.

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in