Employees may get a reason to cheer the Budget, after all. While the chance of increasing the waiver on the amount that income tax is paid hangs under a cloud, with a cash-strapped government reeling under the fiscal deficit, yet there looks to be positive movement on the fringe benefit tax (FBT) issue – charged at 30 per cent of the benefit given to employees.
According to sources in the Finance Ministry there could be a dilution of FBT norms allowing companies not to pay tax on allowances and perks assigned to employees.
However, there is unlikely to be a full withdrawal of FBT, even though there is immense pressure from India Inc, not to mention employees benefiting thereof, to get rid of this most unpopular tax.
Under the limelight are those facets of the tax regime wherein employees do not derive direct benefits. Various expenses falling under this new reasoning may escape paying the FBT, which includes promotion marketing programmes of companies.
The tax has been a sore point ever since its introduction in 2005, by then Finance Minister P. Chidambaram, which had curtailed the lifestyle of many high-flying executives, but more than that it had snatched away from the corporates one of the most important ways to keep its employees happy besides ensuring a low attrition rate. Among the many freebies companies used to reward employees with were memberships of clubs, guest houses, summits, cars, phones and more.