The Hindu Business Line : ICAI for `precise' form of fringe benefit tax

THE Institute of Chartered Accountants of India (ICAI) has favoured a "precise" form of fringe benefit tax (FBT) to the proposed "presumptive" form of taxation of fringe benefits.

The institute has also recommended to the Finance Minister-appointed committee on FBT that small and medium enterprises with turnover of up to Rs 50 lakh per annum or with employee strength less than 20 should be kept out of the FBT tax net. It has also made a case for exempting charitable institutions and trusts from the proposed FBT.

Speaking to Business Line on ICAI's recommendations to the FBT Committee, Mr Ved Jain, Chairman of ICAI's Fiscal Laws Committee, said that the institute was of the view that the FBT should be imposed only at the hands of the employees and not at the hands of the employers. Further, it held that there was no need to compute base for different types of expenditure that are to be covered under FBT.

"There is no need for base computation as we are not in favour of presumptive type of taxation. We are recommending precise taxation i.e., asking the exact amount of fringe benefit to be calculated. We have recommended that the levy of FBT could be simplified by retaining Rule 3 of the Income-Tax rules and making it more stringent so that all perquisites and benefits (including those considered to be fringe benefits) which are enjoyed by employees are taxed in their hands as hitherto," Mr Jain said.

While the ICAI was of the view that no payment or expenditure incurred by the employers that resulted directly or indirectly in any perquisite or benefit to the employees should go untaxed, the institute at the same time held that those perquisites which could be clearly identified to specified employees should be taxed in their hands and not in the hands of the employers.

Mr Jain, who represented ICAI in the FBT Committee, said that the Government should place obligation on the employers to include the value of all benefits, including the ones which are proposed in the Finance Bill as deemed fringe benefits, in the income of the employee while deducting tax at source under section 192 of the Act.

On failure to deduct the correct level of tax, the institute has said that the tax in such cases could be recovered from the employers and further the full amount of expenditure should not be eligible for deduction while computing the business income of the employer in view of the specific provision in section 40(a)(ia) of the Income-Tax Act.

If the Finance Ministry was not agreeable to the suggestion on "precise" taxation of deemed benefits at the hands of the employees, the ICAI has alternatively suggested that the base for all proposed fringe benefit expenditure should not exceed 10 per cent of the expenditure. On this, the FBT rate could be applied and recovered from the employer, it has suggested.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page