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FBT: India Inc wary of taxman's knock
July, 24th 2006

Your neighbours tax payment may well become your burden. Companies cant just relax having paid their own fringe benefit tax (FBT); they must also take a peek at what their peers are paying. If your FBT pay-out is significantly below what your peers have paid, be prepared for the taxmans knock at the door.

Surprised at the wide variation in FBT payments made by India Inc last fiscal, the income-tax department has decided to take a closer look at the tax filings of the top 100 assesses in every zone this year.

A concept note prepared by the department says: There has been wide variation in payment of FBT by members of similar categories of assessees. For example, while SBI has paid Rs 457 crore, Citibank has paid Rs 11 crore and ICICI Bank Rs 27 crore. In same period, Union Bank of India has paid Rs 32.4 crore, the note says.

The strategy involves comparing FBT figures of companies in similar categories. The plan has been put into operation from this month, as the first instalment of advance FBT for this fiscal was due by July 15.

The tax was introduced to bring within the tax net those employee perquisites that companies dress up as reimbursement of expenses and were being taxed neither as perks nor as salary income in the hands of the employees.

If there are wide variations in the tax paid, chief commissioners have been asked to personally monitor advance FBT payments. They will use quarterly financial results of each company from the CMIE data base, to match whether advance FBT paid is commensurate with expenses as specified in the I-T Act.

In cases where a wide gap is noticed between tax payable and tax paid for the first quarter, the chief commissioner should take necessary steps to ensure proper compliance of provisions by assessees, it says.

The department will also issue a com bined return form for FBT and income tax soon. For employers not liable to pay FBT, a separate return form will also be notified shortly.

The stakes are pretty high for the I-T department to make a success of FBT. The department has earned Rs 4,780 crore in FY06 from the tax and expects to earn almost Rs 6,500 crore from it this fiscal.

For any fiscal, FBT has to be paid on or before 15th of the month following a quarter. For the last quarter, the presumptive tax, however, has to be paid by March 15.

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