The income tax department has finally notified the new rules laying down the valuation mechanism for perquisites (‘perk rules’) given to employees by the employers. The new perk rules were long over due ever since the Finance Minister abolished the Fringe Benefit Tax (FBT) in the previous Budget.
The new perk rules have replaced the old perk rules contained in Rule 3 of the Income tax Rules, 1962, (Rules) with retrospective effect from 1st April, 2009.
Employee Stock Options Plans (ESOPs) and its different variants like Employees Stock Purchase Plans, Stock Appreciation Rights, Stock Awards, etc, have been used by employers to attract, retain and motivate employees.
ESOPs have been popular primarily in the knowledge-based industries like IT, biotechnology, etc. However, in the recent past, they have gained prominence even in traditional industries like manufacturing.
The Finance Act 2009 had abolished Fringe Benefit Tax (FBT) with effect from 1 April 2009. As a consequence, it had restored the taxation of perquisites provided by the employer, in the hands of the employee.
The much awaited new rules have now been notified by The Central Board of Direct Taxes (CBDT) vide Notification dated 18 December 2009. The amended provisions will be retrospectively effective from 1 April 2009 onwards.
A Corrigendum to the The Income-tax (13th Amendment) Rules, 2009 was notified on 12th January 2010.
Notification No. 2/2010 [F.NO.142/25/2009-SO(TPL)], dated 12-1-2010
In terms Notification No. 94/2009/ F.No.142/25/2009-S O (TPL), dated 18-12-2009, for the purpose of computing the income chargeable under the head Salaries with effect from 1st April 2009, the value of perquisites in case of Motor Car has been summarised as follows:-
1. Where the motor car is owned or hired by the employer
2. Where the employee owns the vehicle and the actual running and maintenance charges are met or reimbursed to him by the employer
The government had repealed Fringe Benefit Tax (FBT) during the current financial year and specified that new perquisite rules would be notified. After much wait, the new perquisite rules have now been notified this month, which are effective retrospectively from April 1, 2009.
By and large, the perquisite rules in respect of rent-free accommodation are similar to the erstwhile rules. Nevertheless, the following points merit attention:
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