Fringe Benefit Tax (FBT) was introduced as part of Finance Act, 2005 as an additional income tax and came into force from April1, 2005. The term Fringe Benefits means that ‘any consideration for employment provided by way of any privilege, service, facility or amenity provided by the employer to the employees’.

Fringe Benefit Tax is to be imposed on the employer in respect of fringe benefits to be provided by the employer to his employees during any Financial year commencing on or after 1.4.2005
Fringe Benefit Tax is payable at the rate of 30% of the value of fringe benefits calculated in the manner prescribed under the Section 115W.

Salient features of FBT:-

Some of the important features of FBT are listed as follows:

  • Fringe Benefit Tax (FBT) payable by an employer is in respect of perquisites or fringe benefits provided or deemed to have been provided by the employer to his employees in addition to the cash salary or wages paid during the particular year.
  • Fringe Benefit Tax is imposed in addition to the Income Tax charged.
  • Fringe Benefit Tax is payable at the specified rate on the Value of fringe benefits provided to the employees. The value of fringe benefits is computed in accordance with the provisions of Section 115WC of the Income Tax Act, 1961.
  • Employer has to pay Fringe Benefit Tax even if no Income Tax is payable on the Total income.
  • Like any other direct tax, Fringe Benefit Tax is not an allowable expenditure for the purpose of calculation of taxable income.


Some of the key points to be observed in FBT are:-

  • The Rate is calculated on Net Expenses.
  • Expenses are not to be separated between ‘Paid to Employees’ and ‘Paid to Outsiders’.
  • The Depreciation is calculated on the basis of Income Tax.
  • FBT is only applicable on Service Tax paid on any of the expenditure chargeable to FBT.
  • Payment of FBT in case if employers have employees based both in and outside the country.
  • Medical reimbursement upto Rs.15,000 per employee is ultimately charged to FBT.
  • Applicability of FBT in case if any employer is engaged in two or more business activities.
  • Different rates of tax on the Fringe Benefits provided by different Industries.
  • FBT is not payable on Advance paid.
  • Tax Rate is 30% + [email protected]% + Education [email protected]%.
  • One Ledger can have expenditure relating to different groups under FBT.


Some of the important characteristics of FBT are:

  • It is a tax on Expenditure, not Income.
  • It is a tax on Employer, not Employees.
  • It is a surrogate tax on Employers.
  • It cannot be recovered from the Employees.
  • It is to tax benefit that is usually enjoyed collectively by the employees and cannot be attributed to any individual employees.
  • A combination of presumptive and non-presumptive approach has been adopted.


In FBT, an Employer is defined as any of the following:

  • A Company
  • A Firm
  • Association of different Persons or a Body of Individuals (except Fund or Trust or Institution eligible for exemption under section 10(23C) or registered under Section 12AA)
  • Any Local Authority
  • Every Artificial judicial person, not falling within any of the above.


The following are not included as Employer under FBT:

  • An Individual (i.e., Proprietorship concern)
  • Hindu Undivided Family(HUF).
  • Association of different Persons or a Body of Individuals exempt under section 10(23C) or registered under section 12AA.
  • Central Government
  • State Government


Direct Fringe Benefit as classified under section 115(WB)(1) means:

  • Any privilege, service, facility or amenity, which is both directly or indirectly provided by an employer to his employees (including former employee or employees).
  • Any free or concessional tickets provided by the employer for private journeys to employees or their Family members.
  • Any particular contribution by the employer towards an approved superannuation fund for employees.
  • Any reimbursement, which is directly or indirectly made by the employer to employees for any particular purpose.


The fringe benefits tax (FBT) was the tax levied to most, although not all, fringe benefits in India. A new tax was levied on employers by India’s Finance Act 2005 from the financial year commencing on or after April 1, 2005. The fringe benefit tax was temporarily suspended in the 2009 Union budget of India by the Former Finance Minister Pranab Mukherjee.

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