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ESOPs out of FBT net

Special Correspondent

Spending on celebrity endorsement to attract levy

NEW DELHI: Technology companies, in particular, and other corporates have something to cheer about. Employees stock options (ESOPs), one of the baits to retain talent, have been exempted from the Fringe Benefit Tax (FBT). Most other perquisites such as car and health allowances, leave travel facilities and several other amusement benefits, however, are in the net.

In a late night circular on Monday, the Central Board of Direct Taxes (CBDT) made this clear by way of answers to `frequently asked question' while noting that the tax is to be paid in advance by the employers on a quarterly basis during the financial year. Failure to do so in any quarter or payment less than 30 per cent of the value of fringe benefits in any quarter will attract one per cent interest on the shortfall for each month or part thereof.

Besides leave travel assistance that is not included in the salary, some of the other perks that would fall within the ambit of FBT are various forms of entertainment such as amusement, performance, games and sports. Similarly, spending on celebrity endorsement, brand and brand ambassadors, air tickets and hotel stay for customers and clients would attract the levy at 30 per cent of the fringe benefit value.

As for the exemptions, non-transferable food vouchers for eating joints, discounts and rebates to wholesalers and customers, distributor incentives and medical reimbursement up to Rs. 15,000 will not come under the tax net. Likewise, housing allowance for leased or rented accommodation will also be exempt from FBT. Same is the case for gratuity and PF contributions but the premium paid by the employer for group life or health insurance will be liable to the tax, unless statutorily required.

As for the other perks brought under the FBT net, the running and maintenance of motor cars will attract the new levy, as will the interest paid on loans for purchase of automobiles. This apart, even the salary paid to a driver or a pilot will come under the tax. Also, the expenses incurred on the use of telephones, including mobile, installed in the office will be liable to FBT, the circular points out. And this will be so, irrespective of whether the telephone is in the name of the company as also whether the payment for its use is made by the company, directly or indirectly.

A foreign company, which is not an employer in India, will not be liable to pay FBT, but if it employs persons in the country, then it will come under the ambit of the new levy, the circular said. However, if a foreign company does not have any permanent set-up in India and does business promotion through an event manager or a liaison office, it will not be liable to pay the FBT, subject to the condition that it does not have any employees based within the country.

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