Draft Income-tax Rules 2026: How SBI Benchmark Will Tax Employer Loans

The Draft Income-tax Rules, 2026 keep employer loans under the perquisite net, using the SBI benchmark rate and proposing a bigger exemption for smaller loans.

Employer-provided loans look like a simple staff benefit, but tax rules treat the “interest advantage” as salary income when the employee pays 0% or a concessional rate. The Draft Income-tax Rules, 2026 place this valuation under Rule 15, Table IV, and continue to use SBI’s lending rate as the benchmark. 

The practical impact is on monthly payroll, TDS, and Form 16 reporting, especially when HR teams give short-term advances for education, medical needs, housing, or emergencies. The draft rules are also under public consultation till 22 Feb 2026.

What Draft Rules 2026 Change And What Stays?

The main update is structural, not conceptual. The employer-loan perquisite valuation is explicitly housed in Rule 15 (Draft Rules 2026) and uses the same base logic: taxable value equals the interest computed at SBI’s rate for a similar loan purpose (as on 1 April of the relevant year), reduced by interest actually paid by the employee. 

Taxscan’s explainer flags that the SBI rate anchor stays fixed at the start of the tax year, so mid-year rate changes are not used for recomputation in payroll.

Another headline change being reported is threshold relief. Moneycontrol reports that the draft raises the exemption threshold for employer-provided interest-free or concessional loans from ₹20,000 to ₹2,00,000, calling it a tenfold increase.

Here is the quick “what changes” snapshot that salary taxpayers are tracking.
 

The key operational point is this: when a loan crosses the exempt bucket, the valuation still runs month-by-month, and it can push up taxable salary.

How It Worked Earlier: The Backstory And Why SBI Rate Exists?

The SBI benchmark is already written into the existing Income-tax Rules framework. Rule 3(7)(i) states that the benefit from an interest-free or concessional employer loan is valued at the SBI rate (as on 1 April of the relevant previous year) on the “maximum outstanding monthly balance”, reduced by any interest actually paid.

The same rule also contains 2 important carve-outs in the current regime:

1. no valuation for specified-disease medical treatment loans (subject to conditions), and
2. no valuation where aggregate loans are “petty”, not exceeding ₹20,000.

The SBI “perquisite calculation” interest-rate page is also publicly hosted by SBI, and it shows a “Last Updated On: Tuesday, 16-09-2025” stamp for the rate structure used in perquisite computations.

For readers looking for a plain-language example, LoansJagat describes the concept as “interest saved vs bank rate” and illustrates a case where ₹3,000 saved can become taxable perquisite value.

Here is the SBI method in payroll terms.
 

If a ₹5,00,000 loan is interest-free, the taxable value is computed using the benchmark interest for that month and aggregated across months, then reduced by any employee-paid interest.

What Stakeholders Are Saying?

CA (Dr.) Suresh Surana told Moneycontrol that the draft rules consolidate perquisite valuation into a table-based format, moving coverage from Rule 3 (1962 rules) to Rule 15 (Draft Rules 2026).

Moneycontrol also notes the loan exemption threshold is proposed to rise from ₹20,000 to ₹2,00,000, which could reduce disputes on small salary advances but may change TDS mechanics for employers.

Conclusion

Employer loans remain taxable when they create an interest advantage, and the SBI benchmark continues to be the measuring stick. The sharp focus now is the proposed ₹2,00,000 threshold and how it lands in the final notified rules.