Income-tax Act, 1961 | Chapter XII-H | Historical provision

Section 115WKB: Deemed Payment of Fringe Benefit Tax by Employee

Section 115WKB of the Income-tax Act, 1961 addressed the treatment of fringe benefit tax (FBT) paid by an employer on certain employee share benefits and subsequently recovered from the employee. It established a limited statutory deeming rule and expressly prohibited the employee from claiming a refund or using the recovered amount as a credit against other tax liabilities.

Current legal position: Fringe benefit tax under Chapter XII-H does not apply to Assessment Year 2010-11 or any later assessment year by virtue of Section 115WM. Section 115WKB is therefore relevant principally to historical employee share allotments and past-period disputes; it is not a present-day employee tax credit mechanism.

What Section 115WKB provided

Sub-section (1): Deemed tax payment by the employee

Where an employer had paid fringe benefit tax on the allotment or transfer of specified securities or sweat equity shares covered by Section 115WB(1)(d), and later recovered that tax from the employee, the recovered amount was deemed to be tax paid by the employee. This treatment applied only to the extent attributable to the value of the fringe benefit provided to that particular employee, determined under Section 115WC(1)(ba).

Sub-section (2): No refund or tax credit

Even though the recovered amount was deemed to have been paid by the employee for the limited purpose of sub-section (1), the employee was expressly barred from claiming:

a refund arising from that deemed payment; or
credit of the amount against income tax on other income or against any other tax liability.

The deeming provision did not convert the recovered FBT into an adjustable advance-tax payment or tax deducted at source.

Meaning of the connected legal provisions

Provision	Purpose in the former FBT regime
Section 115WB(1)(d)	Covered specified securities and sweat equity shares allotted or transferred by the employer as a fringe benefit, subject to the applicable statutory conditions.
Section 115WC(1)(ba)	Provided the valuation basis for the relevant specified securities or sweat equity fringe benefit.
Section 115WKA	Permitted the employer, notwithstanding relevant agreements or schemes, to vary the terms to recover the specified fringe benefit tax from an employee in qualifying cases.
Section 115WKB	Deemed the amount recovered to be tax paid by the employee for a restricted purpose, while denying refund and credit.
Section 115WM	Made Chapter XII-H inapplicable to assessments for Assessment Year 2010-11 and subsequent assessment years.

Illustrative application

Assume an employer paid Rs. 30,000 of fringe benefit tax attributable to a qualifying employee share benefit in a historical year and subsequently recovered Rs. 30,000 from that employee. Subject to the statutory valuation and attribution requirements, Section 115WKB(1) treated the amount recovered as tax paid by that employee in relation to the relevant fringe benefit. Under Section 115WKB(2), however, the employee could not demand a Rs. 30,000 refund or set it off against salary income tax or another tax liability.

This is a simplified historical illustration, not a computation of current tax liability.

Legislative history and present relevance

Section 115WKB was inserted by the Finance Act, 2008 (Act 18 of 2008), section 29, with effect from 1 April 2008. It operated within the former fringe benefit tax system, which generally placed liability on employers for prescribed employee benefits.

Section 115WM, inserted by the Finance (No. 2) Act, 2009, section 49, ended the application of Chapter XII-H for assessments beginning on 1 April 2010 and thereafter. The Income Tax Department's 2025 legislative mapping identifies Section 115WKB as redundant in the newer statutory framework. Historical issues should be assessed with reference to the law applicable to the relevant year, including limitation and procedural provisions.

Modern taxation of employee stock options and other employment-related share benefits is governed by the applicable salary and perquisite provisions, rather than by the discontinued FBT recovery rule. See the Income Tax Department's guidance on income from salary.

Frequently asked questions

Can an employee claim a refund of FBT recovered by an employer?

No. Section 115WKB(2)(i) expressly denied a refund of the amount deemed to have been paid by the employee under sub-section (1).

Can recovered FBT be adjusted against another income-tax liability?

No. Section 115WKB(2)(ii) expressly prohibited such a credit against other income or any other tax liability.

Does Section 115WKB apply to current employee stock option grants?

No. The former Chapter XII-H fringe benefit tax regime does not apply from Assessment Year 2010-11 onwards. Current grants require analysis under the applicable employee perquisite rules.

Official statutory sources

Last reviewed: 27 October 2026. This article is general legal information and not advice for any specific tax assessment.