Agreeing to the persistent demand from industry chambers, the government on Tuesday watered down the Fringe Benefit Tax provisions, introduced last year, a move that will help employers give better perks and facilities including superannuation schemes and tour and travel to employees with less tax burden.

Announcing the changes in the Budget proposals, Finance Minister P Chidambaram doubled the limit to Rs 2 lakh contributed by an employer to an approved superannuation fund for tax exemption.

Tour and travel expenses will now attract just five per cent as FBT instead of 20 per cent levied last year.

In case of airline companies and shipping industry offering hospitality and hotel boarding and lodging facilities will have to pay five per cent as FBT compared to 20 per cent levied earlier.

Free samples of medicines, medical equipment distributed to doctors and expenses incurred on brand ambassadors and celebrity endorsement have been excluded from the ambit of FBT.

Following are the details of the changes announced by the finance minister.

• Fringe Benefit Tax introduced last year as a revenue raising measure; justified on the principles of horizontal equity and vertical equity; on review, following changes being proposed:
• Value the benefit in the form of 'tour and travel' at 5 per cent instead of 20 per cent;
• Value benefit in the form of 'hospitality' and 'use of hotel boarding and lodging facilities', in case of airline companies and shipping industry, at 5 per cent instead of 20 per cent;
• Exclude expenses on free samples of medicines and of medical equipment distributed to doctors;
• Exclude expenses incurred on brand ambassador and celebrity endorsement; and
• Prescribe a threshold of Rs 100,000 under section 115WB(1)(c) so that only a contribution by an employer to an approved superannuation fund in excess of Rs 100,000 per year per employee to attract FBT.
• Under section 80C there is already exemption up to Rs 100,000 for contribution by an employee to an approved superannuation fund.
• Effective FBT rate on hospitality reduced to 1.68% from 6.73%.
• Free sample exclusion from FBT to benefit pharma companies.