Financial Daily from THE HINDU group of publications
Monday, Dec 05, 2005
Financial Daily from THE HINDU group of publications Monday, Dec 05, 2005 |
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Industry & Economy
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Income Tax Panel for exempting contribution to superannuation funds from FBT K. R. Srivats
New Delhi , Dec. 4 CONTRIBUTIONS made to approved superannuation funds should not be subjected to Fringe Benefit Tax (FBT), a Government-appointed panel of tax experts has recommended. This panel, which was required to recommend the road map for moving towards an Exempt-Exempt-Taxation (EET) system of taxation of savings, had submitted its report to the Union Finance Minister, Mr P. Chidambaram, on November 28. Informed sources said that the move to recommend the exclusion of such contributions from the ambit of FBT came purely out of considerations of taxation principles and not due to industry representations. "If EET system is to be adopted, it would not be proper to tax contributions made to superannuation funds under FBT," the sources said. In the 2005-06 Budget, the Government had specified that the "actual amount of contribution made by the employer to the approved superannuation funds" would be included in the base for the computation of FBT. This implied that the entire contribution was considered for FBT calculation. After the Government brought in such contributions under the scope of FBT, the life insurance industry and the corporates have been making a case for their exclusion. Under the EET system, the contributions and accumulation in savings instruments are tax-exempt, but withdrawals are taxed as ordinary income.
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