Finance minister P Chidambaram is likely to announce changes in the fringe benefit tax (FBT) and the banking cash transaction tax (BCTT) in the Parliament tomorrow. The modifications in the two new taxes are expected to be announced during the discussion on the Finance Bill in Lok Sabha on May 2, finance ministry officials said. Indications are that while FBT would be capped at 10% of the expenditure for levy of FBT, the limit on BCTT is likely to be raised to Rs 25,000 from Rs 10,000. On FBT, sources said some expenses like sales promotions, travelling, advertising and publicity cannot be treated as benefits to employees, and would therefore be excluded from the purview of FBT as envisaged in Section 115 WB(2). Moreover, loss-making and small companies may be spared from FBT as most of them offer no significant fringe benefits to their employees.Medical facilities, which are not considered perquisites in terms of the proviso to section 17(2), should not come under FBT, sources said. Chidambaram had set up a committee headed by advisor Parthasarathy Shome to look into various aspects of FBT following certain anomalies pointed out by industry captains.Shome held detailed meetings with industry chambers CII and FICCI and professional bodies, and is understood to have given his suggestions to the finance minister. On BCTT, sources said the proposed limit of Rs 10,000 may be extended to Rs 25,000 or above, and mandatory quoting of PAN may be extended to such cash withdrawals on a single day. PAN is mandatory for bank transactions of Rs 50,000 and above. "The purpose of the tax is not for generating revenue but to leave a tax trail. Hence, the threshold limit is likely to be hiked in case of current accounts, and savings accounts may be spared so that ordinary depositors are not harassed," officials said. Tax experts said the objective of tax trail can be achieved through the Annual Information Return under Section 285 (BA) of the Act and asking account holders to quote PAN. Further, all taxpayers may be required to give details of all their bank accounts in their return of income to have an effective trail of all bank transactions.
