Taxation - Calculating loan benefit with solution

loan benefit is of the special/specific benefit in kind a and can be quantified as to find out how much to be included is someones total taxable  income, below is the an illustration of how to calculate the loan benefit.

Example

Mr, Joel has been employed by Vodacom (T) Ltd as a marketing manager. During the year of income 2013, His employer provided him with a free interest loan amounting to Tshs. 15 mil. Payable in 18 months while his basic salary was Tshs. 3 mil. p.m. Assuming the statutory rate is 20% p.a., calculate the loan benefits enjoyed by Mr. Joel

Solution

             Loan Benefit = P (r_s - r_e)
Whereby 
P- Loan principle
r_s = Statutory rate 
r_e = Employer’s loan rate

Then:

P= 15,000,000/ =

r_s = 20%    ;    '

r_e = 0% ( free interest loan)

Loan benefit - 15,000,000 (20%-0%)

Loan benefit = 3,000,000/=