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2. Rationale And Meaning Of ‘Fringe Benefits Tax’"[ Assessments of 'Fringe Benefits' ]

 

The rationale of FBT as explained by the Finance Minister P. Chidambaram in his Budget speech (Budget 2005-06) is given below :

 

“I have looked into the present system of taxing perquisites and 1 have found that many perquisites are disguised as fringe benefits, and escape tax At present, where the benefits are fully attributable to the employee, they are taxed in the hands of employee; that position will continue. In addition, 1 now propose that where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees, thay shall be taxed in the hands of the employer.”

 

Thus, the main objective of FBT is to tax, in the hands of employer, the benefits usually enjoyed collectively by the employees and which cannot be attributed to individual employees. It is so because many corporate employers and other big employers incure high expenditure on providing fringe benefits to their employees. It helps these big employers to attract and retain talented employees in the organisation because such fringe benefits keep the morale of employees high. The enjoyment of fringe benefits infuses among employees a sense of belongingness and loyalty to the organisation in which they work in. Fringe benefits are becoming an important component of remuneration packages being offered by all most all the big organisations.

In order to explain the provisions of FBT in detail and to clear the doubts regarding FBT, the CBDT later issued a circular No. 8/2005. The justification of FBT as explained in the circular is given below

“The taxation of perquisites or fringe benefits is justified both on grounds of equity and economic efficiency. When fringe benefits are under taxed, it violates both horizontal and vertical equity. A tax-payer receiving his entire income in cash bears a higher tax burden in comparison to another taxpayer who receives his income partly in cash and partly in kind, thereby violating horizontal equity. Further, fringe benefits are generally provided to senior executives in the organisation. Therefore, under taxation of fringe benefits also violate vertical equity. It also discriminates between companies which can provide fringe benefits and those which cannot thereby adversely affecting market structure

 
 
More Topics... @ FBT
Assessment of Fringe Benefit Tax (FBT) - An Introduction
Rationale And Meaning Of ‘Fringe Benefits Tax’ : Assessments of ' Fringe Benefits'
Perquisites Taxable In The Hands Of Employees V/S Fringe Benefits Tax : Assessments of ' Fringe Benefits'
Feature Of Fringe Benefits Tax : Assessments of ' Fringe Benefits'
Meaning Of Certain Expressions [ Section 115W] : Assessments of ' Fringe Benefits'
Charge Of Fringe Benefit Tax [Section 115WA ] : Assessments of ' Fringe Benefits'
Fringe Benefits [Section 115WB] : Assessments of ' Fringe Benefits'
Some Examples of Fringe Benefits : Assessments of ' Fringe Benefits'
Some Examples Of Benefits Which Are Not Fringe Benefits : Assessments of ' Fringe Benefits'
Value Of Fringe Benefits [Section 115WC] : Assessments of ' Fringe Benefits'
Advance Tax In Respect Of Fringe Benefits : Assessments of ' Fringe Benefits'
Return Of Fringe Benefits [Section 115WD] : Assessments of ' Fringe Benefits'
Assessment Of Fringe Benefits [Section 115WE ]
Best Judgement Assessment [Section 115WF ] : Assessments of ' Fringe Benefits'
Time Limit - Completion Of Assessment U/s-115WF-Sec-153 Amendment
Fringe Benefits Escaping Assessment [Section 115WG] : Assessments of ' Fringe Benefits'
Section 115WH :Issue Of Notice Where Fringe Benefits Have Escaped Assessment
Payment Of Fringe Benefit Tax [Section 115WI ] : Assessments of ' Fringe Benefits'
Advance Tax In Respect Of Fringe Benefits [Section 115WJ ] : Assessments of ' Fringe Benefits'
Interest For Default In Furnishing Return Of Fringe Benefits [Section 115WK]
Computation Of Interest U/S 115WK—Amendment In Section 140A(1A)]
Claim Of Refund Under Fringe Benefit Tax [Section 238(1A)]
Period Within Which Refund Of Tax Paid Under Fringe Benefits Tax Can Be Claimed [Section 239(2)] : Assessments of ' Fringe Benefits'
Interest On Refund Under Fringe Benefit Tax [Section 244A(1) and (3)] : Assessments of ' Fringe Benefits'
Appeal To Commissioner (Appeals)[Section 244A(1)(AA)] : Assessments of ' Fringe Benefits'
Penalty For Non Complying With The Notice [Section 271(1)(b) & (d)] : Assessments of ' Fringe Benefits'
Penalty For Failure To Furnish Return Of Fringe Benefits [Section-271FB] : Assessments of ' Fringe Benefits'
Penalty For Non-Furnishing Of Quarterly Return U/S 206(a) [Section 272a(2)] : Assessments of ' Fringe Benefits'
Prosecution For Not Furnishing Of Return U/S 115WD(1) or u/s 11WH(1) [Section 276CC] : Assessments of ' Fringe Benefits'
Abetment Of False Return Filed U/s-115WD(1) or U/s 115WH(2)[Section-278] : Assessments of ' Fringe Benefits'
Amendment Of Section 119 [Section-115WL] : Assessments of ' Fringe Benefits'
 
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