Fringe Benefits Tax (FBT) is a tax imposed on employers for providing certain additional benefits to their employees, alongside their regular salaries. While India abolished FBT in 2009, it's crucial to understand the concept and its implications, as it is still applicable in various countries. In this article, we will provide insights into FBT, its key aspects, and its impact on businesses and employees.
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Fringe Benefits Tax Overview
FBT is a tax levied on the value of specific benefits offered by employers to their employees. These benefits can take various forms, including financial perks like company cars, private healthcare, or non-financial rewards such as educational assistance.
Example of a Fringe Benefit
Consider an employee receiving a company car for both professional and personal use. The value of this car is deemed a fringe benefit and subject to FBT.
FBT Rates
FBT rates vary depending on the nature of the benefit and the country's tax regulations. For instance, in Australia, the FBT rate stands at 47%. In this context, if an employee receives benefits worth $100, the employer would owe $47 in FBT.
The Abolition of FBT in India
In 2009, the Indian government abolished FBT, which was previously taxed at a rate of 30% on most employer-provided benefits. This move was welcomed by businesses and employees alike, as it reduced the cost of offering benefits and made India a more appealing destination for talent.
FBT Exemptions (Before Abolition)
Prior to its abolition, FBT exemptions existed in India, including:
1. Employees with salaries below Rs. 15,000 per month were not liable to pay FBT.
2. Employees with over five years of service in an organization were exempt from FBT.
3. Employees who left their job before completing five years were subject to FBT.
4. Transferred employees within the same organization to another city were exempted from FBT.
