Face the tax heat as pre-FBT norms return
By siliconindia   |   Monday, 21 December 2009, 22:23 IST   |    8 Comments
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Face the tax heat as pre-FBT norms return
New Delhi: Taxpayers enjoying perks, may see their tax touching sky in the next three months as the government changed the way these perks are valued and may ask whole year's tax in the next three months, reports Economic Times. The Central Board of Direct Taxes on Friday notified new rules for valuation of perquisites provided by employers to employees. It comes with retrospective effect from April 1, 2009, after the Fringe Benefit Tax was abolished and perks became taxable in the hands of the employee. Now, the value assigned to the perk enjoyed by the taxpayer will now be added to his total income and be taxed accordingly, depending the tax bracket he is in. In fact, some employees could even go up to a higher tax bracket because of this addition of perks to the income. This entire tax liability is to be recovered in the remaining three months of the year if employers have not deducted any tax so far. "Tax liability for the full year needs to be recovered by March 31, 2010 from the taxpayer, which could result economic hardship of employee, in case no tax has been withheld in absence of the perquisite valuation rules," said Vikas Vasal, Partner, KPMG. Perks offered by employees such cars, rent-free accommodation, services of personal attendants, confessional education, confessional journeys, credit card, interest-free loans, gift vouchers, hotel stay exceeding 15 days and medical facilities, employee stock option plan have become taxable in the hands of employees now. The government has retained the old perquisite valuation rules that were in place prior to the FBT regime, only marginally tinkering with in the case of cars and food vouchers where value of meal has been fixed at 50 apiece. Small cars below 1.6 litres will now have a value of 1,800 per month while cars with engine capacity above 1.6 litre cubic capacity will have a value of 2,400 per month, if expenses on maintenance and running are reimbursed by the employer.

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