FBT - whatyouwant.in

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The taxation of perquisites -- or fringe benefits -- provided by an employer to his employees, in addition to the cash salary or wages paid, is Fringe Benefit Tax (FBT).

According to P. Chidambaram's announcement in the Lok Sabha, a Fringe Benefit Tax(FBT) of 30% will be levied on 20% of the fringe benefit expense. In simpler terms, Fringe Benefit Tax(FBT) will work out to be 6% of the total amount.

But in end, the effective Fringe Benefit Tax(FBT) turned out to be just 2% for regular companies and 0.5% for special-category companies like IT and pharmaceuticals. What's more, India Inc can avoid paying even this minuscule amount of tax if their auditors certify an expense as a genuine business expenditure.

According to industry sources, there will be 1.5 to 2% additional tax burden to companies due to items covered under Fringe Benefit Tax(FBT) account for about 10-15% of total corporate profits.

Taxable or Exempted items under Fringe Benefit Tax (FBT)
Taxable Exempted
Use of telephones, including mobile phones, the base for valuation will be 20% for example Expenses on advertising

The base for valuation of FBT will be 20% for expenses on entertainment, hospitality, sales promotion and publicity, employee welfare, conveyance, tour and travel (including foreign travel) and use of hotels. for example Expenses on leased lines will.

50% for expenses on festival celebrations, use of clubs, scholarships and so on. for example Charitable institutions, trusts and funds.

For superannuation funds, FBT will be levied on the entire contribution made by the employer for employees. for example Individuals and Hindu Undivided Families (HUFs) engaged in a business or profession.

Tax on foreign tour and travel. Infosys, for instance, spend about 4% of its revenues on foreign travel. Phone bills account for close to 1%, another expense attracting the fringe benefit tax. for example Conference expenses, only the fee for participation

Repairs and maintenance of cars have also been brought under the purview of fringe benefit tax now. The only saving grace is that only 5% of maintenance costs for transport companies will now be subject to FBT. Employee welfare expense, only the expenses incurred to fulfill any statutory obligation or to mitigate hazards or to provide first aid facility that too only in a hospital or dispensary run by the employer.
Any privilege, service or amenity provided directly or indirectly by an employer by way of reimbursement or otherwise to employees will attract FBT, which is to be paid by employers. Guest houses for training.

Fifty per cent of expenses on club facilities. for example Expenses incurred due to sales promotions

Expenses borne by companies on foreign travel of their employees will be under the purview of FBT. FBT on travel expenses has been cut to 5%. for example Medical expenses.

Any free or concessional ticket provided by the employer for private journeys of employees or their family members and any contribution to an approved superannuation fund for employees will come under the purview of FBT. for example Companies that are loss making.

Expenditure on employees welfare will attract FBT, but not the expenditure incurred or payment made to fulfil any statutory obligation or mitigate occupational hazard or provide first aid facilities in hospital or dispensary run by employers.

Other expenditures that will come under FBT are conveyance, tour and travel including foreign travel, use of hotel, boarding and lodging facilities, repair, running, maintenance of motor cars and aircraft and the amount depreciation on them.

Maintenance of any accommodation like guest house except those used for training purposes, festival celebrations, use of health club and similar facilities, use of any other club facilities, gifts and scholarships will come under FBT.

% of expense under the fringe benefit tax

Earlier Now
Use of telephone (other than leased lines) 10% 20%
Entertainment 50% 20%
Scholarship to children of employees Actual 50%
Hospitality 50% 20%
Maintenance of accommodation like guest houses 50% 20%
Conference 50% 20%
Employee welfare 50% 20%
Sales promotion, including publicity 50% 20%
Festival celebration 50% 50%
Gifts 50% 50%
Use of club facilities 50% 50%
Use of health clubs, sports and similar facilities 50% 50%
Conveyance, tour and travel,
including foreign travel 20% 20%
Hotel, boarding and lodging 20% 20%
Repair, running (including fuel), maintenance of motorcars and depreciation thereon 20% 20%
Repair, running (including fuel), maintenance of aircraft and depreciation thereon 20% 20%

Tax of 30% will be levied on the value of the fringe benefit calculated at the above rates

By : amit on 22 Dec 2008 01:39 pm

pls. attach

By : Pranab on Apr 21, 2009 03:29 am