Now, perks under tax ambit

For, a notification issued by Central Board of Direct Taxes (CBDT) employees will now have to pay Income Tax on plethora of  perks being provided to them by the employers.

The Fringe Benefit Tax (FBT) being paid by employers for giving such non-cash benefits to employees has come to an end shifting the burden of tax liability to employees.

The FBT, which came to an end on March 31 this year, is being replaced with a new tax regime, which will tax the perquisites in the hands of employees.
“The new tax rules stipulating the guidelines for valuation of non-cash perks for taxation purpose have come into force with retrospective effect from April 1 this year,” according to CBDT spokesperson Sisir Jha. 

“The new rules are more or less same as these were prevalent before the introduction of the FBT. Prior to introduction of the FBT under the Rule 3 of Income Tax Rules 1962 various kinds of non-cash perks were taxed at the hands of the employees,” he said. 

Under the new tax rules there will be taxation of perquisites enjoyed by employees at the applicable rate and it will be collected through Tax Deducted at Source (TDS) route.

The government may come out with a method for computing the levy on the perks given by employers, including government.
Slew of benefits

Other perks like traveling, free-food and non-alcoholic beverages provided by the employer, any gift or vouchers received by employees on ceremonial occasions, reimbursements for membership of a club tour and allowances would also come under the purview of this new tax plan.

Any benefit by the employer that will result in free education for any member of employee’s family, will also be taxed. In case of employees availing benefits like interest free or concessional loan interest component will be added to income and will be taxed. However there will be no such tax liability on medical loans availed by the employees.

Similarly, if your company bears expenses on gas, electricity, water you use at home such expenditure will be added to income of employees and will be taxed at applicable rate. If you engage a sweeper and gardener for personal use at your company’s cost you will have to pay tax on such expenditure.

In case of employees enjoying benefits under Employees Stock Options (ESOPs) the difference between the face value of allotted equities and “fair” market value prevalent at the time of offloading the shares, will be added to the income of the employee and will be taxed at the applicable rate.
Dip in salary
Tax analysts say though employees enjoying perks, on which they now have to pay tax, will see a significant dip in their take-home salaries it has removed ambiguities both employees and employers faced under the FBT regime.

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