It's divided house on the move to bring perks under tax

They feel that the new tax rules have contributed towards removing ambiguities on the onus of tax liability under the earlier Fringe Benefit Tax (FBT). The centre has finally specified the rules as both companies and individuals will have clarity on their tax liability, observed PricewaterhouseCoopers Executive Director Kuldip Kumar. “Employees won’t suffer too much as the valuation norms are not as stringent as expected,” he said.

But others opine it will make a dent into the take home salaries of employees. Wondeland Investment Consultants Director Sandeep Shanbhag said under the new tax rules the tax burden for employee will go up. “When your employer was paying FBT, even if this cost was passed on to you, the effective tax rate was often as low as 6.8 per cent. Now these perquisites will be added to your salary, so you will end up paying tax at the level of your bracket. If you are in the top bracket, this means 30.9 per cent,” he explained, adding, this, in turn, will help government to get more revenues.

“The CBDT notification converts the earlier employer-based tax system (FBT) into an employee-based one and this has the net effect of raising taxes,” Shanbhag said.
Chartered Accountant Mehul Sheth said “the good part is that some allowances have still been left outside the definition of perquisites. When FBT was abolished, people thought that some part of official expenses — such as telephone expenses, tour and travel bills - would be added as expenditure to the employee and taxed as a perquisite. But this has not happened.”
DH News Service

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