Monday, February 28 2005 20:25 Hrs (IST) - World Time -

Bangalore: Indian software exporters have expressed anguish over Finance Minister's proposal to levy 30 per cent tax on fringe benefits incurred by companies on employees fearing it may have an impact on their profitability.

"The fringe benefits tax is worrisome because of definitional issues. If the intent is only to tax some fringe benefits not currently taxed, it is reasonable but the definitions look very wide right now," India's second largest software exporter Infosys Technologies said.

"There is a lack of clarity on Fringe benefits tax," Aztec software Chief Financial Officer V Sundararajan said, adding," As its coverage is sweeping and may impact the profitability of corporates".

The fringe benefits tax proposals exempt expenses incurred on conveyance and canteen allowances, but Finance Minister P Chidambaram had not elaborated on what other benefits to employees are taxed.

The software houses are miffed as they invest substantial part of their revenue on employees welfare to retain talent in the highly competitive sector.

"The Fringe benefits tax as envisaged covers many heads of expenses that, in a service industry, are nowhere in the nature of benefits for employees," Wipro CFO Suresh Senapaty said, and called for clarity and appropriate correction, if an anamoly existed.

Mphasis CFO Ravi Ramu said the proposal, which was worrisome for the sector, had to be examined in detail and its impact on the companies studied.