Madras High Court dismisses Andhra Bank officers' challenge to tax on staff loan benefit
The Madras High Court dismissed a petition by an Andhra Bank officers' federation challenging income tax on the benefit of interest-free or concessional staff loans, citing earlier rulings.
Key points
- The Madras High Court on 14 October 2026 dismissed a 2010 writ petition by the All India Andhra Bank Officers Federation.
- The petition challenged Section 17(2)(vi) of the Income Tax Act, Rule 3(7)(i) of the Income Tax Rules and a bank circular on taxing staff loan benefits.
- The court held the issue is covered by its earlier ruling, upheld by the Supreme Court, that such loan benefits are a taxable perquisite.
The Madras High Court has dismissed a writ petition filed in 2010 by the All India Andhra Bank Officers Federation against the income tax charged on the benefit bank staff get from interest-free or concessional loans. In its order of 14 October 2026, a division bench of the court held that the question is already settled by its own earlier ruling and by the Supreme Court.
What Happened
The federation had asked the court to declare Section 17(2)(vi) of the Income Tax Act, Rule 3(7)(i) of the Income Tax Rules and part of a circular dated 26 December 2009 issued by Andhra Bank unconstitutional and void. The Union of India, the Central Board of Direct Taxes and the Chief Commissioner of Income Tax, Chennai were respondents along with the bank.
The court noted that a division bench of the same court had earlier heard a batch of similar petitions and upheld the validity of Section 17(2)(viii) and Rule 3(7)(i). It also noted that the Supreme Court, in a 2024 judgment, dismissed the appeals against that ruling and upheld Section 17(2) and Rule 3(7).
The order quotes the Supreme Court as holding that the benefit bank employees enjoy from interest-free or concessional loans is in the nature of a perquisite, a benefit on top of salary, and so is liable to tax. The Supreme Court also held that using the State Bank of India's lending rate (PLR) as the benchmark to value that benefit is neither arbitrary nor unequal. Since the issue was squarely covered by these rulings, the High Court dismissed the petition with no order on costs.
What It Means
For bank employees who take loans from their employer at a lower interest rate, the order confirms that the court will not reopen the question: the benefit can be taxed as a perquisite, valued with reference to the State Bank of India rate, as the earlier rulings held.
The order does not set any new rate or deadline. It closes a petition that had been pending since 2010 by applying the law already settled by the High Court and the Supreme Court.
Source: High Court judgment
Sources & Citations
- High Court judgment — Madras High Court