Fringe Benefits Tax – FAQs

What is the meaning of Fringe Benefit Tax ?

A new Chapter XII-H is being introduced in the Income Tax Act, 1961 containing sections 115W to 115WL and Fringe Benefit Tax is the tax chargeable u/s 115WA of the Act. It has been introduced by the FM as he was of the opinion that there are benefits being provided, or are deemed to be provided to employees, by the employers that are escaping taxation. However, the way the provisions are currently structured it is obvious that it is not just the Fringe Benefit which is being brought under the tax net but genuine business expenditure is also being taxed under the garb of FBT.

Which entities are liable to pay FBT ?

Thank god for small mercies, as the FM has deleted i) Individuals, ii) HUFs and iii) registered funds or trusts from the ambit of FBT during the discussion in Parliament. The Central and State Govts were in any case out of the ambit of FBT from the beginning.

Thus all companies, partnership firms, AOPs, local authority and every judicial person not falling under any of the above sub clauses is covered under FBT.

What are Fringe Benefits ?

As per Sec 115WB (1) of the Act, “Fringe Benefits” means any consideration for employment provided by way of

a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer whether by way of reimbursement or otherwise to his employees (including former employee or employees) or

b) any free or concessional ticket provided by the employer for private journeys of the employees and their family members; and

c) any contribution by the employer to an approved superannuation fund for employees.


What are Deemed Fringe Benefits ?

As per Sec 115WB (1) of the Act, fringe benefits shall be deemed to have been provided by the employer to the employees if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income, profits or gains), incurred any expense on or made any payment for, the following purposes, namely:—

(A) entertainment;