Industry seeks fringe benefit tax relief

Industry seeks fringe benefit tax relief
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First Published: Wed, Dec 19 2007. 12 30 AM IST
Updated: Wed, Dec 19 2007. 12 30 AM IST
New Delhi: In their pre-budget wish lists, industry lobbying bodies Associated Chambers of Commerce and Industry of India (Assocham) and the Federation of Indian Chambers of Commerce and Industry (Ficci) have urged the government to abolish fringe benefit tax on regular business expenses and employee stock options in the proposed Union budget for fiscal 2009.
The Union budget, which will deliberate on changes to existing tax laws and the allocation of new ones, will be unveiled on 28 February.
Fringe benefit tax was introduced in Finance Act, 2005, and took effect from 1 April 2005. Under the law, certain benefits given to an employee by companies in addition to the salary paid, such as mobile phone expenses are subject to fringe benefit tax. The tax has to be paid by the companies. The fringe benefit tax rate is around 33.66% on the value of the fringe benefit.
In its pre-budget memo, Assocham says that many regular business expenses, which are not employee benefits, have been brought under the fringe benefit tax umbrella. It has urged that expenses incurred on travel, conference and sales promotion should be removed from the list of expenditure that would attract the fringe benefit tax.
In addition, employers also have to pay fringe benefit tax for giving gifts to customers purchasing products. Gift distribution is common in garment, white goods, fast moving consumer goods, and automobile industries. As employees do not derive any benefit from the gesture, it does not make economic sense to subject employers to fringe benefit tax on such expenses, Assocham said.
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First Published: Wed, Dec 19 2007. 12 30 AM IST