The Finance Act’ 2005 introduced the concept of Fringe Benefit Tax under the purview of the Income Tax Act’ 1961 from sections 115W to 115 WL. 

Finance Act’ 2005 has adopted a bifacial approach for the taxation of fringe benefits: 

1. Perquisites which can be directly attributed to the employees:
    
   Such perks will continue to be taxed in the hands of the employees in accordance with the existing provisions of section 17(2) and subject to rule 2A, 2B and 2BB, which have been dealt in a detailed manner under the head perquisites of the salaries module.

2. Perquisites which cannot be directly attributed to the employee or where because of practical impossibilities it is not feasible to tax the benefits in the hands of the employee:
    
   Where it is not possible to tax the benefits on account of non feasibility/ practical problems to tax benefits the Fringe Benefit Tax comes into picture. This tax has to be paid by the employer on the value of such benefits provided or deemed to have been provided to the employees.