Under the 2009-10 Budget, fringe benefit tax (FBT) has been abolished. While this will be favourably received by the finance departments of companies, the impact on your personal finances might not be optimal for you. Here’s why.
Also See FBT and your take-home pay (PDF)
As you see in the graphic, we have considered the case of an employee earning an annual CTC (cost to company) of Rs750,000 under the current scenario and the proposed scenario. The annual fringe benefits offered to the employee are just under Rs300,000. Assuming that under both scenarios the taxpayer is using his/her full Rs1 lakh deduction under section 80C, the net annual taxable salary in the existing scenario is Rs3,68,000 and in the proposed scenario, Rs6,44,996. Under the existing scenario, the take-home salary (the CTC less the income tax and FBT on fringe benefits provided) is Rs7,00,418 (93% of CTC), whereas under the proposed scenario, it will be Rs6,49,576 (87% of CTC).
As this example demonstrates, you may be worse off under the proposed rules.
iTrust Financial Advisors (www.iTrust.in)