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Fringe Benefit Tax Up to 01.04.2006, benefits or amenities collectively enjoyed by employees escaped taxation since it was difficult to attribute any quantum of benefit to individual employees. The Finance Act 2005 introduced an additional income tax in respect of such benefits known as the Fringe Benefit Tax transferring a substantial tax liability from employees to employers while simultaneously simplifying tax collection. Chapter XII-H containing sections 115W to 115WL were inserted in the Income tax Act. This chapter has been divided into three parts- Part A containing meaning of certain expressions used in the chapter, Part B containing the Basis of charge and Part C prescribing the procedures for filing of return, assessment and payment of tax. S. 115W defines an ‘employer’ as a a) A company; b) A firm; c) An association of persons or a body of individuals, whether incorporated or not; d) A local authority; and e) Every artificial juridical person, not falling within any of the preceding sub-clauses: The following persons are deemed not to be an ‘employer’: · Institutions/trusts eligible for exemption under clause (23C) of S.10 · Institutions/ trusts registered under S.12AA · Registered political parties Besides the above, the following persons are not liable to pay FBT: · Individuals · Sole proprietorship concerns · HUFs · Central Government · State Governments · An entity which does not have employees based in India. (Since an employer-employee relationship is pre-requisite for the levy of FBT.) S.115WA is the charging section which makes FBT applicable in an AY if the following conditions are satisfied · FBs are provided or deemed to be provided by an “employer” · To employees · During the PY. This tax shall be calculated @ 30% on the value of Fringe benefits (plus Surcharge plus Education cess) FBT has no relationship with the total income computed under the Income Tax Act. Even if a person has no income or exempt income under S.10A or S.10B, the person remains liable to pay FBT. S.115WB (1) lists out four types of Direct FBs and S.115WB (2) specifies seventeen types of FBs which are deemed to have been provided by the employer irrespective of whether the expenditure is attributed to employees or not .E.g. Sales Promotion

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