The finance ministry is considering a threshold staff strength for levying the fringe benefit tax on employers.

Finance ministry officials today indicated that organisations with very few employees could be exempted from the tax. This is based on the assumption that small employers do not spend large amounts on fringe benefits.

The ministry will also examine combining the tax return for fringe benefits with the income tax return to avoid the need for filing separate forms.

At a workshop on Budget proposals organised by the Institute of Chartered Accountants of India, the finance ministry officials said they were open to suggestions on improving the levy of the fringe benefit tax and the cash withdrawal tax.

Explaining the rationale for taxing 50 per cent of the employer's contribution to the superannuation fund, officials said if an employer paid the money to the employee directly the full amount would be taxed in the hands of the employee so there was reason to tax the amount when the employer paid it into the  superannuation fund.

The officials said the valuation method for the fringe benefit tax was based on the field experience of tax officials.

Sales promotion has been included in the new tax because it is difficult in practice to distinguish it from entertainment expenses as companies use both expense heads for similar purposes. That is why the fringe benefit tax is imposed on 50 per cent of the actual expense in either case.

The officials, however, indicated they were open to other valuation methods because their aim was to tax only those employee benefits that had not been taxed in the hands of employee.

To which ICAI representatives pointed out that assessees covered under the presumptive tax could not be subjected to the fringe benefit tax because they were not required to maintain detailed books of accounts.

On improving the audit trail of banking transactions, the officials took note of the ICAI's suggestion that the ministry should make it mandatory for all assessees to disclose all their bank accounts in their income tax returns. The institute suggested that the government should ask all banks to give details of accounts whose holders had not furnished their PAN details.

The ICAI, opposing the cash withdrawal tax, said if the tax was inevitable, it should apply to all banks. The current proposal, it pointed out, did not apply to transactions at co-operative banks and other non-scheduled banks.

Softening the blow Finance ministry officials indicate organisations with very few employees could be exempted from the fringe benefit tax This is based on the assumption that small employers do not spend large amounts on fringe benefits North Block will also examine combining the tax return for fringe benefits with the income-tax returns to avoid the need for filing separate forms