Bowing to the longstanding demand of corporates, finance minister Pranab Mukherjee today announced the abolition of fringe benefit tax (FBT) on certain benefits provided by employers to their employees.

"The Finance Act, 2005 introduced the FBT, which has been perceived as imposing considerable compliance burden. Empathising with these sentiments, I propose to abolish the FBT," Mukherjee said while presenting the union budget for 2009-10.

However, there are speculations that the ministry may have diluted certain provisions of FBT and may exclude expenses on various items, which do not directly benefit employees.

Marketing and sales promotion may go out of the purview of FBT, and they do not benefit the employees directly, sources said.

Only once the ministry spells out the details, we can say how much it will benefit the employees, said a tax expert.

The imposition of FBT, modelled on the Australian system, was introduced in 2005 by the then finance minister P Chidambaram, in a bid to tax companies on perquisites provided to their employees. It has sparked off a huge debate among corporate and tax circles since its inception in 2005.