Abolishing FBT transfers the Tax burden on Employees

            The government had announced in Budget 2009-10 that Fringe Benefit Tax (FBT) on perks provided by employers would be abolished but its impact is going to kick in from next month with the Central Board of Direct Taxes issuing a notification on Friday which transfers the tax burden on the employee.

             For instance, while a car of upto 1.6 litre engine capacity in the pre-FBT regime would call for Rs 1,200 tax outgo at the hands of an employee, the same is now fixed at Rs 1,800. Anything above this engine capacity would amount to a monthly tax outgo of Rs 2,400. Add Rs 900 as tax on your monthly salary bill if the company has also provided you a chauffeur, said Kuldip Kumar, an executive director with PricewaterhouseCooper.

                In case the employer has provided a car to an employee for his personal use, the entire expenses borne by the company on the running of the car and its maintenance would be liable for tax at the hands of the employee.

              Accommodation, car, salary of your gardener, assistant at home, watchman, your electricity, water, club, credit card and holiday bills will all be taxed on actual expenses and as per the limit specified in the new notification.

             In the FBT regime introduced by then finance minister P Chidambaram in 2005, perks were taxed to employers while fringe benefits enjoyed by employees were tax free.

             Now, your club membership will be taxed to you unless it is specified in your work contract that it is for official purpose.

                In fact, the CBDT notification should have come just after the Budget to make it easy for employees to spread his tax outflow over the entire fiscal. However, it has come at the fag end of the year when in the remaining three months entire tax will be calculated and deducted at source resulting in lower pay cheque for employees
source:Times of India

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