# Interest-Free Loans: Tax Rules Explained

> How employer loans up to ₹20,000 are tax-free under Indian income tax rules.
- Title: Interest-Free Loans: Tax Rules Explained · mint | Shortify
- Summary: How employer loans up to ₹20,000 are tax-free under Indian income tax rules. Interest-free loans from employers under ₹20,000 or for specified medical…
- Keywords: interest-free loan, employer loan, tax exemption, income tax rules, medical loans, sbi rate, perquisite, taxable amount, news, india, Interest-Free, Loans
- Source: mint — https://livemint.com/money/personal-finance/explained-received-an-interest-free-loan-money-from-employer-know-what-this-special-benefit-means-when-it-is-taxable-11792922273662.html
- Author: Sheetal Goel
- Published: 2026-10-25T11:47:10+00:00
- Read time: 1 min
- Topics: interest-free loan, employer loan, tax exemption, income tax rules, medical loans, sbi rate, perquisite, taxable amount, news, india
## What is an employer loan under tax rules?
An interest-free or concessional loan from an employer is taxable as a perquisite under income tax rules.
## How is the taxable value calculated?
Taxable value equals interest at SBI rate minus interest paid by employee on the loan.
## Taxable steps for perquisite calculation
Calculate monthly loan balance, apply SBI rate, deduct employee interest, remaining amount is taxable.
## Loans up to ₹20,000 are tax-exempt
Interest-free or concessional loans of up to ₹20,000 are exempt from income tax.
## Medical loans qualify for tax exemption
Loans for cancer, tuberculosis, AIDS, and other specified treatments are tax-exempt.
## Exemptions don't apply for insurance reimbursements
Tax exemption reduces by amount reimbursed by insurance companies for medical expenses.
## Loans exceeding ₹20,000 are taxable
Interest-free loans over ₹20,000 are taxable as perquisites under income tax rules.
## When is an employer loan taxable?
Loans exceeding ₹20,000 with no medical treatment exemption are taxable under salaries.
## Key takeaway

Interest-free loans from employers under ₹20,000 or for specified medical treatments are tax-exempt under Indian income tax rules.