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Bankers body Convene Meet over SC Ruling on Interest-Free Loans

Following a recent verdict from the Supreme Court, the All India Bank Officers’ Confederation (AIBOC) will hold a meeting with its senior officials on Sunday to chart out their next steps. The court’s decision, delivered on Tuesday, deems the interest-free or concessional loans provided by banks to their employees as fringe benefits subject to taxation according to income tax regulations. This ruling is anticipated to impact approximately 1 million bank employees nationwide.

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“We’re convening a virtual meeting on Sunday to explore our legal options,” stated a senior AIBOC representative to FE. “We’re considering engaging additional legal counsel to present our case more effectively,” they further elaborated.

The Supreme Court’s ruling follows a series of appeals lodged by various bank staff unions and officers’ associations contesting the taxation guidelines.

Dinesh Khara, chairman of State Bank of India, addressed the media during a press conference on Thursday regarding the court’s decision and its potential implications, stating, “This is a Supreme Court judgment; we have the option to appeal. We are yet to assess whether the ruling applies retrospectively. Once we review the judgment, we’ll be in a better position to comment on its impact on individual employees and banks. It’s premature to speculate at this stage.”

Bank federations are currently scrutinizing the court’s ruling to ascertain whether it applies retroactively or prospectively. Bankers caution that retroactive application of the ruling could impose a substantial financial burden on employees.

“If the ruling is retroactive, it will place a significant financial strain on bank employees and could complicate tax recovery and calculation processes,” remarked a senior official from a public sector bank. “The implications for recovering taxes from retired bank employees also need to be considered,” they added.

Bank employees note that similar benefits extended to employees of insurance companies, railways, and other sectors remain outside the purview of taxation.

The Supreme Court’s ruling arises amid challenges to Section 17(2)(viii) of the Income Tax Act, 1962, raised by staff unions and officers’ associations of several banks on constitutional grounds.

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