Non-applicability of Perquisite Tax to former employees – Violation of law by State Bank of India – Value of perquisites cannot be added to income of non-employees.
Prasad C N
09.08.2026
To: Leaders and Members of Affiliate Associations
One of the foremost responsibilities of any organisation genuinely committed to the welfare of its members is to safeguard their existing legal and statutory rights and ensure that every legitimate benefit due to them is extended without dilution. At the same time, it must strive continuously for improvement in the welfare of its members.
The State Bank Retirees Association has consistently pursued both these objectives with dedication. It has been vigilant in protecting the legal rights of retired employees while simultaneously pursuing the extension of all benefits available to them under law. We remain committed to leaving no stone unturned in safeguarding the interests of our members.
One such issue, which has adversely affected a large number of retirees, relates to the treatment of the concessional rate of interest on Staff Housing Loans and Staff Vehicle Loans continued after retirement. The State Bank of India has been treating the value of such concessional interest as a "perquisite" and adding its value to the income of retired employees for Income Tax purposes.
The inclusion of the perquisite value artificially inflates the taxable income of pensioners and, in many cases, results in an additional tax liability. Although the Bank has agreed to bear the tax liability arising from such perquisite value, this arrangement is available only where the aggregate of pension income and the perquisite value exceeds ₹12.75 lakh.
However, the Bank is adding the value of the alleged perquisite to the income of all retired employees who continue to enjoy concessional interest on staff housing or vehicle loans, irrespective of whether they are ultimately liable to pay tax.
Consequently, in several cases, pensioners whose actual pension and other income (including interest on deposits) are below the threshold of ₹12.75 lakh are shown as having income exceeding that limit solely because of the addition of the so-called perquisite value. This has serious adverse consequences, including denial of rebates and unnecessary tax complications.
It is pertinent to note that some Public Sector Banks have not adopted this practice. They have correctly recognised that concessional interest extended to former employees cannot be treated as a taxable perquisite because the concept of a "perquisite" under the Income-tax Act necessarily presupposes the existence of an employer-employee relationship. Once an employee retires, that relationship ceases. In the absence of an employer-employee relationship, no taxable perquisite can arise.
With a view to protecting the interests of affected pensioners, the State Bank Retirees Association held detailed consultations with an eminent legal expert who is both an Advocate and a qualified Chartered Accountant.
The expert has opined that every item reflected in Form 16 or Form 26AS need not necessarily be treated as taxable income. An Assessee is required to disclose only such income as is legally chargeable to tax. Since the value of concessional interest extended to a retired employee does not constitute a taxable perquisite in law, there is no legal requirement to include such amount in the taxable income.
Accordingly, he has advised that all retired employees whose Income-tax Returns include the value of such perquisites should file Revised Income-tax Returns excluding the perquisite value from their taxable income.
This advice applies irrespective of the total income declared. Even those whose total income is below ₹12.75 lakh, but whose return includes the value of the alleged perquisite, should also file Revised Returns after excluding the perquisite value.
The last date for filing a Revised Return is 31 December 2026. Filing a Revised Return by excluding the inadmissible perquisite value does not result in any additional tax liability. On the contrary, it protects the legal rights of the Assessee.
Failure to file a Revised Return, or continuing to include the alleged perquisite value in the return, may be construed as acceptance that such amount constitutes taxable income and could prejudice the assessee's legal position in future.
Upon filing a Revised Return, the Income-tax Department may either accept the claim and issue the appropriate refund or process the return under Section 143 of the Income-tax Act and disallow the claim. The State Bank Retirees Association is making appropriate legal and professional arrangements to assist affected members in dealing with such situations, if they arise.
It is, therefore, once again strongly advise all affected members of Affiliate Associations to file Revised Income-tax Returns excluding the value of the alleged perquisites from their taxable income. This simple but important step will go a long way in protecting their legal rights and financial interests.
State Bank Retirees Association remains committed to protecting the rights and interests of retired employees through every lawful means available.
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Dr. A Ananthakrishna Rao President
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C N Prasad General Secretary
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Anand Rao
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