WHAT IS FRINGE BENEFIT TAX (FBT)?
Fringe Benefit Tax (FBT)
Fringe benefit tax (FBT) was a form of tax that companies paid in lieu of benefits they offered their employees in addition to the compensation paid to them. It was included by the Finance Act 2005 with effect from April 1, 2006. It was set at 30 per cent of the cost of benefits the company paid and it was aimed to bring under the tax net those benefits that were previously out of it. This tax was paid in addition to income tax, irrespective of whether or not the company had income-tax liability.
What are fringe benefits?
Companies give some fringe benefits to all their employees and some only to those at the executive level for costs related to their work. Some others may also be extended for increasing general job satisfaction. Some of the common fringe benefits are telephone reimbursements, employer’s contribution to the superannuation fund, and access to creche services. These could also include perks like tuition assistance, health insurance, childcare reimbursements, subsidised cafeteria, free bus service for commute, employee discounts and employee stock options.
Why do companies offer fringe benefits to employees?
Companies use fringe benefits to motivate, recruit and retain high-quality employees at the organisation. Companies that compete for best talent in their field often offer extraordinary benefits.
Abolition of the fringe benefit tax
Various provisions related to income tax on fringe benefits were modified by the Finance Act, 2006. Certain exemptions were clearly laid out with regard to what came under the purview of Fringe Benefit Tax. The Finance Act, 2009, abolished Fringe Benefits Tax completely, and now such perquisites are taxable in the hands of employees. These may include value of accommodation, leave travel concession, encashment of non-availed earned leaves, medical reimbursement and so on.
FRINGE BENEFIT TAX (FBT) NEWS
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