Your perks will be taxed effective from April '09

NEW DELHI: Salaried taxpayers enjoying perks, such as residential accommodation, conveyance and others, are going to have a burn in their pocket, as the government has introduced new rules of taxation, which replaces the already abolished Fringe Benefit Tax.

According to the new rules, notified on Friday by the Central Board of Direct Taxes, the Fringe Benefit Tax (FBT) being paid by employers for giving non-cash benefits, including cars and employee stock options (ESOPs), to employees will be abolished and replaced with a regime that will tax the perquisites in the hands of the employees.

The new rule, called the Income-tax (13th Amendment) Rules, 2009, comes with retrospective effect from April 1, 2009.

According to this, the value assigned to the perk enjoyed by the taxpayer will now be added to his total income and be taxed accordingly, depending the tax bracket he is in. In fact, some employees could even go up to a higher tax bracket because of this addition of perks to the income, according to analysts. The new guidelines were based on the proposals in the Budget 2009.

Ever since the introduction of the FBT in 2005 by the then Finance Minister P.Chidambaram,, companies have been demanding abolition of this tax. However, the new rule is seen as a burden to the employees and also it may result in a marginal fall in the government's revenue.

As the taxation now goes back to the pre-FBT regime, the entire tax liability will be recovered from the employees in the remaining three months of the year if employers have not deducted any tax so far.