Fringe Benefits

Meaning & Definition

Fringe benefits are perks and benefits offered in addition to salary by employers to their employees. Examples of fringe benefits would include health insurance, a company car, meal vouchers, housing, and wellness incentives. Fringe benefits are used to complement the total compensation package or to provide employee satisfaction and retention.

Importance of Fringe Benefits 

• Improves total compensation for employees.
• Enhancement to employee satisfaction and retention.
• Assistance in attracting and retaining top talent.
• Improvement of an employee’s well-being and work-life balance.
• Enhancement of employer branding under the benefits program.
• Encouragement of long-term employee engagement.

Legal & Regulatory Considerations

• Tax liabilities are governed by the Income Tax Act, 1961 (taxes charged will depend on the type of benefit).
• Certain benefits are taxed as fringe benefits under section 17(2).
• Form 16 must be filed by employers for reporting any taxable benefits.
• Specific rules for valuing benefits exist within the Income Tax Rules.