Fringe Benefit tax- A bitter pill

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The verdict is finally out, whether you like it or not, the Fringe Benefit tax is finally in place. On passage of the Finance Bill 2005, a new set of tax called Fringe Benefit tax (FBT) is introduced. Though the Finance Minister has promised that the feelings of the Corporate India will be looked into , nothing much happened finally. The Finance Minister had proposed thirty percent tax on the taxable value in his budget and many expected that he will have a relook at it and downscale it. He has only marginally modified the taxable portions forming part of Fringe benefit between the bill and the Act passed.

The Finance Minister had said that the basic purpose of this tax is that a large proportion of benefits flow indirectly to salaried class which are not specific to each employee but are enjoyed collectively by employees. The list of items coming under FBT is too extensive and he has not left any stone unturned. In the case of telephone expenditure, the taxable value has been increased from 10% to 20% and in certain cases pertaining to entertainment and sales promotion the same have been reduced from 50% to 20% . The amendments have been made arbitrarily.