Bankers body convene meet over SC ruling on interest-free loans

The court order will affect nearly 1 million bank employees in the country.

Stunned by a recent ruling by the Supreme Court, the All India Bank Officers’ Confederation (AIBOC) will convene a meeting of its senior officials on Sunday to decide the future course of action. In a major setback for bank employees, the top court, on Tuesday, ruled that the interest-free or concessional loans extended by banks to their employees are fringe benefits and are liable to be taxed as per income tax laws.  The court order will affect nearly 1 million bank employees in the country.

“We will hold a virtual meeting on Sunday to explore what all legal recourse we have,” a senior representative of AIBOC told FE. “We are planning to have one more counsel so that we can put forward our case more effectively,” he added.

The Supreme Court ruling comes amidst a series of appeals filed by various bank staff unions and officers’ associations challenging the taxation rules.

“This is a Supreme Court judgement, we can go and appeal also. We are yet to review the judgement (whether the rule is retrospective in nature). We will evaluate and then will be in a position to comment  (about impact on individual employees and bank). It is too premature at this stage,” said Dinesh Khara, chairman of State Bank of India, talking to media in a press conference, on Thursday, held to announce results.

Bank federations are also analysing the court order to find whether this order is retrospective or prospective. Bankers say that if this order is retrospective then it will mean a huge financial burden for employees.

“If this ruling is retrospective then it will put a significant burden bank employees and will also create complications in recovery and computation of tax amount,” said a senior bank official of a public sector bank. “It needs to be seen how recovery will be done from retired bank employees,” he added.

Bank employees said that similar benefits are also offered to employees of insurance companies, railways and other companies but their those benefits are out of tax net.

This ruling has come in the wake of staff unions and officers’ associations of many banks challenging Section 17(2) (viii) of the Income Tax Act, 1962, on the grounds of constitutionality.