Even though the corporate entities are enjoying the removal of Fringe Benefit Tax by Union Finance Ministry, this happiness is going to be a short lived one. According to the sources, the finance ministry has plans for imposing tax on the extended perks allowed by the organizations for its people in the same manner as it used t be charged before imposing FBT. 

 

"We are planning to draw out a list of the perks, which will be issued soon. The notification is expected to come in a few days," the official told. So the individuals need to spend more for filling the government funds. 

 

Perks which may be covered under this tax includes the car provided by employer or the running expenses of a personal car that are re-imbursed by the employer, domestic help paid by employer, free or concessional education, any gift vouchers, food or non-alcoholic beverage given to the employee, membership fees of clubs paid on employer credit cards, value of travelling or tour paid for by employer for holiday of employee, among others.

 

"The perquisite value of these will be computed and added to the total annual income of the employee, which will then be taxed as per the set income tax rules and slabs specified in those rules," said KPMG executive director Vikas Vasal.

 

But items such as books and journal allowances can spark off debates. "This will create a distortion and will off-set the benefit that has been made available to the individual by raising the tax slabs by Rs 10,000. In fact, the individual's tax pay out may be more than what he or she would have paid if the slabs had not been revised," said PriceWaterhouse Coopers associated director (direct tax) Kuldeep Kumar.

 

According to Budget 2009-10 documents, the government has plans for amending the Clause (2) of Section 17 of the Income Tax Act so that perquisite can also be included in the value of fringe benefits or amenity as it may be prescribed. Once the list is drawn out, it will be made applicable from April 1, 2010.