Employees will now have to pay taxes on perquisites given to them by their employers as the Central Board of Direct Taxes has notified the much-awaited rules for valuation of the benefits. With these rules, the fringe benefit tax (FBT) being paid by employers for giving non-cash benefits, including cars and employee stock options (ESOPs), to employees will be abolished and replaced with a regime that will tax the perquisites in the hands of the employees. It could mean less take-home pay for employees.
Previously, under the controversial fringe-benefit tax (FBT) regime, these perks were taxed at the hands of the employer. However, as exclusively reported by FE earlier, the new norms are almost a replica of the erstwhile Rule 3 of the Income-Tax Rules, which was largely rolled back in 2005 with the introduction of FBT.
The sources further said the Government may come out with a method for computing the levy on the perks given by employers, including government.
Other perks like traveling, free-food and non-alcoholic beverages provided by the employer, any gift or vouchers received by employees on ceremonial occasions, reimbursements for membership of a club tour and allowances would also come under the purview of this new tax plan.
While government employees will be taxed after the deduction of licence fee from the valuation arrived according to the city of accommodation, in the case of government employees on deputation to public sector companies and private sector employees, the tax will be on entire valuation.
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