Ahead of the Union Budget 2026-27, a union representing officers of public sector banks (PSBs) has urged the Centre to provide tax relief on leased accommodation and concessional staff loans, citing the growing financial burden on bank employees.
The Bank of Maharashtra Officers’ Organisation (BOMOO) has written to Finance Minister Nirmala Sitharaman, seeking amendments to the Income Tax Act to address what it described as inequitable taxation of service-linked facilities.
Perquisite Taxation Adds to Financial Burden
In its representation, BOMOO stated that facilities such as official residential accommodation and staff loans, which are mandatory for PSB officers due to service requirements, are currently taxed as perquisites under Section 17(2)(viii) of the Income Tax Act, 1961.
According to the union, this results in a substantial financial burden on officers, particularly those posted in high-rent urban centres.
Disparity with Govt Employees Highlighted
The union pointed to Rule 3 of the Income Tax Rules, which it said creates an inherent disparity between government employees and PSB officers. While central and state government employees are taxed on a nominal licence fee, generally between ₹2,000 and ₹5,000 per month, for official accommodation, PSB officers are taxed on the full market rent of leased housing arranged by banks.
As a result, officers face an additional annual tax liability of ₹60,000-70,000 or more, depending on their place of posting, the union said.
Housing a Service Necessity, not a Perk
BOMOO emphasised that PSB officers are subject to all-India transfers and are required to reside at their place of posting. Leased accommodation or rent reimbursement, therefore, should be treated as a service necessity rather than a discretionary benefit.
Taxation of Concessional Staff Loans Also Flagged
The representation also raised concerns over the taxation of concessional staff loans, including housing and vehicle loans, which have traditionally formed part of PSB officers’ service conditions.
The union said that taxation of notional interest benefits has resulted in additional annual tax liabilities ranging from ₹25,000 to as high as ₹3 lakh, significantly reducing take-home pay.
Call for Legislative Amendment in Budget 2026-27
While acknowledging that the Supreme Court has upheld the taxation of such perquisites under existing law, BOMOO argued that legislative intervention through the Budget is now the only solution. The union has sought amendments to Section 17(2)(viii) and relevant provisions of Rule 3 to either:
- Exclude employer-provided leased accommodation and concessional staff loans from taxable perquisites, or
- Align their valuation with the licence-fee-based system applicable to government employees
Role of PSB Officers in Government Programmes
Highlighting the broader public interest, BOMOO noted that PSB officers play a critical role in the implementation of government schemes, financial inclusion initiatives, and priority sector lending.
The union argued that the tax burden arising purely from service-imposed facilities should not be passed on to individual officers.
Source: Business Standard