FBT abolition should help attract talent
The Union Budget for 2009-10 on Monday proposed to abolish the Fringe Benefit Tax (FBT) — which was largely viewed as a tax which was yielding peanuts to the government but costing the employees a lot in terms of FBT on ESOPs.
The saving for India Inc from FBT may not be much, which is roughly over Rs 2,500 crore going by the FBT paid by all listed companies in 2007-08 at over Rs 2,100 crore, but it was viewed as a major irritant to employees as well as accountants which only added realms of paperwork to corporates.
State Bank of India which paid FBT of Rs 142 crore in the financial year 2008-09 expected to be major beneficiary of abolition of FBT. Larsen & Toubro, ONGC, Reliance Industries, Bharti Airtel, Hindustan Unilever, ICICI Bank, SAIL, Cairn India and Indian Oil would save between Rs 30 and Rs 70 crore. With the proposals to abolish FBT, the employers now can spend more on employee entertainment, welfare, conference, conveyance, company car, sales promotion, hospitality, hotel & lodging, telephone and maintenance of accommodation. Experts point out that FBT on productive employee benefit tools such as ESOPs (employee stock options) and super-annuation plans had turned out to be a disincentive to give employee such benefits.
In this context, Infosys CFO V Balakrishnan avers, “There is a case for removing the FBT because ESOP is a great tool for smaller companies to attract great talent and because of the FBT some of the smaller companies are not able to attract good talent and when you are a startup company you are short of cash.”
Echoing similar views, Zenith Birla CEO of M S Arora, said “Removal of FBT is a welcome step which will help eliminating the cumbersome procedure to keep a track of figures under this head.”
