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Income-tax Act, 1961 / Chapter XII-H

Section 115WA: Charge of Fringe Benefit Tax

Section 115WA established an additional employer-level income tax on specified fringe benefits. It is now a historical provision: Chapter XII-H ceased to apply from assessment year 2010-11 under section 115WM.

Current legal position: No fringe benefit tax is chargeable under Chapter XII-H for assessment year 2010-11 or later. The 30% rate in section 115WA relates to the former regime and must not be treated as a current tax rate.

What was fringe benefit tax?

Fringe benefit tax (FBT) was an additional income tax imposed on an employer in respect of specified benefits provided, or deemed to have been provided, to employees. The term employer was defined in section 115W, subject to the exclusions specified there. Fringe benefits were described in section 115WB, and their taxable value was determined under section 115WC.

Section 115WA: statutory provisions

Sub-section (1): charge and rate

In addition to the income-tax charged under this Act, there shall be charged for every assessment year commencing on or after the 1st day of April, 2006, additional income-tax (in this Act referred to as fringe benefit tax) in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year at the rate of thirty per cent on the value of such fringe benefits.

Sub-section (2): liability despite no income tax

Notwithstanding that no income-tax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer.

Explanation of section 115WA

Section 115WA(1): employer-level levy

The provision imposed a separate levy of 30% of the value of chargeable fringe benefits, in addition to the employer's ordinary income-tax liability. The value was governed by the statutory rules in section 115WC; it was not necessarily equal to the employer's entire expenditure on benefits.

Section 115WA(2): independent tax liability

FBT could have been payable even if the employer had no income-tax payable on its total income. This rule addressed the employer's liability under the former regime, not the taxation of employee perquisites today.

When was fringe benefit tax abolished?

The Finance (No. 2) Act, 2009 inserted section 115WM, which states that nothing in Chapter XII-H applies to an assessment for assessment year commencing on 1 April 2010 or any subsequent assessment year. Accordingly, the FBT regime applied historically through assessment year 2009-10 and was discontinued from assessment year 2010-11.

The former provisions may remain relevant when reading historical assessments, disputes, employment arrangements or tax records for the years to which they applied.

How are employee benefits treated today?

The discontinuation of FBT did not make every employee benefit tax-free. Depending on its nature and the applicable year, a benefit may be considered under salary and perquisite provisions, including section 17(2) and the applicable valuation rules. The tax treatment depends on the specific benefit, statutory exclusions and the law applicable to the relevant tax year. Employer withholding obligations may also apply.

For periods governed by the Income-tax Act, 2025, consult that Act and the corresponding rules rather than applying the historical FBT provisions. The 1961 Act remains relevant to earlier tax years and proceedings as provided by the transition and savings provisions.

Official legal sources

Updated 27 October 2026. This article explains the historical provision and does not replace advice based on the facts and tax year of a particular case.