In a meagre relief to corporates, Finance Minister P Chidambaram on Friday announced exemption of guesthouses and sports events for employees from the purview of Fringe Benefit Tax.

On ESOPs, a new section in the Income Tax Act would be introduced providing that where fringe benefit tax on ESOPs has been paid by the employer and subsequently recovered from the employees, the recovery of FBT shall be deemed to be the tax paid by such employee.

Also, any expenditure or payment through pre-paid electronic meal card shall be excluded from the hospitality expenditure for calculation of the value of fringe benefit.

However, electronic meal cards would not be transferable and should be usable only at eating joints or outlets.

"Creche facilities, sponsorship of an employee sportsperson, organising sports events for employees and guesthouses will be excluded from the purview of FBT," he said presenting the Budget for 2008-09 in Parliament in New Delhi.

Besides, any expenditure on maintenance of guesthouses shall not be included for valuation of fringe benefits. Hitherto, the Income Tax Act provided that where an employer incurs any expenditure, inter alia, for the purposes of entertainment, hospitality, conference and sales promotion (including publicity), such employer shall be deemed to have provided fringe benefits to its employees.

Besides, amendments are proposed to provide that the value of fringe benefits on account of expenditure on festival celebrations shall be 20 per cent as against existing rate of 50 per cent.

While the amendment on ESOPs shall take effect from April 1, 2008, other changes shall take effect from April 1, 2009 and shall accordingly apply in relation to assessment year 2009-10.

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