During these troubled times, here comes in a carrot, with the Finance Minister proposing in his budget on scrapping the Fringe Benefit Tax (FBT). Most medium to large companies were offering special allowances as a part of the bouquet of allowances to employees for claiming better tax benefits, which in turn attracted FBT on such allowances for the companies. The much hyped Stock Option Plans (ESOP’s) with many riders on to it, also was subjected to FBT, if they were to be exercised resulting in capital gains.  With FBT expected to be removed, Companies will now pass on the burden of tax directly to the employees.

In reality one would wonder if FBT really pinched the companies very hard, and did allow the employees to get better benefits. And if the withdrawal of the FBT, if this will actually help companies reduce much tax burden and help employees carry larger pay packet.

Well atleast on one count, the employees will benefit on exercising the stock options now that it will not be covered under FBT.

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