Tax on loan interest difference?

We are having a wedding in our family after a long time. So, we are having relatives over from across India. My uncle, who is the regional manager of SBI, also came. We were talking about lots of things since I've met him after a very long time. During the discussion he mentioned one thing that surprised me.

So, People from public sector banks get loans at a much better rate than normal people. At around 5-6% for home loan. Now, an average home loan interest for public is 8-10%. What really caught me off guard was learning about the tax implications of this benefit.

Apparently, the government views the money saved on these lower interest rates as a form of income. As a result, my uncle has to pay taxes on the yearly difference in interest rates, which amounts to about 3-4%. I was amazed to discover this creative - and in my opinion, somewhat exploitative - method the government uses to extract taxes from people.

It's eye-opening to see how even what seems like a straightforward employee benefit can have hidden financial consequences. This conversation certainly gave me a new perspective on the intricacies of our tax system and how it affects different professions.