The Hindu : National : Ceiling on cash withdrawal tax likely to be raised

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Wednesday, Apr 27, 2005

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National

Ceiling on cash withdrawal tax likely to be raised

Special Correspondent

Fringe benefit tax too may be modified Tax experts told Mr. Shome that for the purposes of the FBT levy, the fringe benefit should not exceed 10 per cent of the expenditure.

NEW DELHI: With the deadline for the passage of the Finance Bill approaching, there are indications that both the "controversial" proposed taxes — the Fringe Benefit Tax (FBT) and the Banking Cash Transaction Tax — may be modified.

According to official sources, while the FBT is likely to be brought down to 10 per cent of the expenditure along with exemption for certain business activities, the ceiling on the proposed cash withdrawal tax is likely to be raised from above Rs. 10,000 to Rs. 25,000 if not more.

The changes in the two proposals, sought both within and outside the ruling coalition, were likely to be announced by the Finance Minister, P. Chidambaram, either while moving the Finance Bill for discussion in the Lok Sabha on May 2 or later while replying to the debate in the House, sources said.

Bowing to intense pressure in and outside Parliament, Mr. Chidambaram, it might be recalled, had set up a committee headed by his Adviser, Parthasarathy Shome, to revisit the various aspects of the FBT with a view to removing the anomalies pointed out by the captains of industry during post-budget interactions. Following meetings at length with representatives of the apex chambers and other taxation experts, Mr. Shome has placed his suggestions before the Finance Minister.

Tax experts, it is learnt, told Mr. Shome that for the purposes of the FBT levy, the fringe benefit should not exceed 10 per cent of the expenditure. Business activities such as sales promotion, business travel, advertising and publicity should also not be treated as benefits to employees and, therefore, excluded from the purview of the tax.

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