Fringe Benefit Tax(FBT): Employers Get Time

CMA Gul S , Last updated: 25 September 2007
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With rules for payment of fringe benefit tax on employee stock options yet to be finalised, the Central Board of Direct Taxes (CBDT) on Wednesday extended the last date for payment of the first two instalments of advance tax to December 15 this year.

While the first instalment was to be paid by June 15, the second tranche was due by Saturday.

CBDT extended the date as it is yet to prescribe the method to calculate the fair market value for ESPOs and sweat equity, an official release said.

Under section 115 WB, introduced by Finance Act, 2007, an employer is liable to pay FBT on a benefit provided to its employees through specified securities or sweat equity shares allotted or transferred, directly or indirectly free of cost or at concessional rate.

Information technology companies have opposed the levy and have demanded that the government should raise the demand for the tax from the employees, as they are the beneficiaries of ESOPs. For companies, it is expenditure, they have said.

The value of the fringe benefit is determined as the fair market value of the specified security or sweat equity share on the date on which the option vests with the employee as reduced by the amount actually paid, by or recovered from the employee for the allotment of such security or shares.