Perks tweaked in line with FBT

NEW DELHI: The fringe benefit tax (FBT) is here to stay. The government has notified revised rules for perquisite valuation in line with its proposal to make most perks taxable in the hands of the employer instead of the employee. The exception is rent-free accommodation.

Right now, perks, including cars, interest on loans, educational facilities, use of laptops and computers, entertainment expenses are taxed in the hands of employees. The amended rules exempt employees from paying this tax.

Senior Central Board of Direct taxes (CBDT) officials said the amendment in the rules was warranted to ensure that there was no double taxation. These perquisite rule amendments will stay if the fringe benefit tax is legislated.

For cars, a 30 per cent fringe benefit tax is proposed to be levied on 20 per cent of the repair, running and maintenance expenses. Also, 20 per cent of the petrol costs are proposed to be taxed at a rate of 30 per cent. The tax will have to be paid by the employer.

According to the perquisite norms, cars hired or owned by the employer and used for official purposes are not treated as perquisites in the hands of the employee if proper documents are maintained. So is the case if an employee owns the car, and the actual running and maintenance charges are for official purposes and are reimbursed by the employer.

A car owned or hired by the employer and partly used for official and partly for personal purposes, is treated as a perquisite.

Perks are benefits over and above the normal salary received by an employee and these are taxable under the income-tax law. Perquisites also cover entertainment expenses stock option plans, personal attendants, gas, electricity and water, concessional education, concessional journeys, interest free loans, gift vouchers, free meals etc.

In this year’s budget, the FM has proposed levying a fringe benefit tax on the employer on the grounds that there is an inherent difficulty in isolating the “personal element� where there is collective enjoyment of such benefits and attributing it to the employee.