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	Fringe benefit tax (FBT) was a form of tax that companies paid in lieu of benefits they offered their employees in addition to the compensation paid to them. It was included by the Finance Act 2005 with effect from April 1, 2006. It was set at 30 per cent of the cost of benefits the company paid and it was aimed to bring under the tax net those benefits that were previously out of it. This tax was paid in addition to income tax, irrespective of whether or not the company had income-tax liability.</div>
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	<strong>What are fringe benefits?</strong></div>
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	Companies give some fringe benefits to all their employees and some only to those at the executive level for costs related to their work. Some others may also be extended for increasing general job satisfaction. Some of the common fringe benefits are telephone reimbursements, employer&rsquo;s contribution to the superannuation fund, and access to creche services. These could also include perks like tuition assistance, health insurance, childcare reimbursements, subsidised cafeteria, free bus service for commute, employee discounts and employee stock options.</div>
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	<strong>Why do companies offer fringe benefits to employees?</strong></div>
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	Companies use fringe benefits to motivate, recruit and retain high-quality employees at the organisation. Companies that compete for best talent in their field often offer extraordinary benefits.</div>
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	<strong>Abolition of the fringe benefit tax</strong></div>
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	Various provisions related to income tax on fringe benefits were modified by the Finance Act, 2006. Certain exemptions were clearly laid out with regard to what came under the purview of Fringe Benefit Tax. The Finance Act, 2009, abolished Fringe Benefits Tax completely, and now such perquisites are taxable in the hands of employees. These may include value of accommodation, leave travel concession, encashment of non-availed earned leaves, medical reimbursement and so on.</div>

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Learn what is Fringe Benefit Tax (FBT), Fringe Benefit Tax Definition and more Fringe Benefit Tax news at Business Standard.

What is Fringe Benefit Tax, What is FBT, Fringe Benefits, Fringe Benefit Tax Definition

Fringe Benefit Tax (FBT)

What is Fringe Benefit Tax (FBT)?

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	Corporation tax is a direct tax imposed on the net income or profit that enterprises make from their businesses. Companies, both public and privately registered in India under the Companies Act 1956, are liable to pay corporation tax. This tax is levied at a specific rate according to the provisions of the Income Tax Act, 1961.</div>
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	In a major move, Finance Minister Nirmala Sitharaman in September 2019 announced sharp cuts in the corporation tax among a series of announcements. The government decided to slash domestic corporate tax to an effective 25.17 per cent, inclusive of all surcharges and cess, in a bid to promote growth and investments amid an economic slowdown. The move would cost the exchequer Rs 1.45 trillion.</div>
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	The government proposed to reduce the corporate tax rate from the existing 30-25 per cent (depending on the turnover thresholds) to 22 per cent (effective rate 25.17 per cent, including surcharge and cess) for all the domestic companies, subject to them not availing of a specified list of exemptions. These include, among others, exemptions available to units in special economic zones, deductions for certain scientific research expenditure, additional depreciation available on fresh investments and the losses, if any, attributable to such deductions.</div>
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	The minimum alternate tax (MAT), introduced to facilitate the taxation of zero-tax companies, will also not be applicable to companies availing of the reduced rate of taxation.</div>
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	Companies claiming exemptions could continue to avail of them and pay taxes at pre-amended rates, that is, 25-30 per cent. They might opt to pay taxes at lower rates at a future date. However, the option to pay taxes at the reduced rate of 22 per cent, once selected could not be changed. Significantly, where the companies continue to avail of exemptions, the MAT rate has been reduced from 18.5 per cent to 15 per cent.</div>
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	Any new domestic manufacturing company, incorporated on or after October 1, 2019, is to be allowed to pay corporation tax at the rate of 15% (effective rate 17.01%). No MAT is to be imposed on these companies either.</div>
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	Enhanced surcharge will not apply to capital gains on sale of any securities, including derivatives, in the hands of Foreign Portfolio Investors (FPIs).</div>
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	The finance minister also announced an expansion in the scope of corporate-social responsibility (CSR) activities. The companies can now spend 2% of the money on state or Union govt incubators, PSUs, state universities, IITs, public-funded entities.</div>

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