FRINGE BENEFIT TAX (FBT). Road to FBT……. FBT levied on EmployerFBT levied on Employees Australia...

FRINGE BENEFIT TAX (FBT)

Road to FBT…….

FBT levied on Employer FBT levied on Employees

Australia

New Zealand

ChinaHong Kong

JapanMalaysia

RussiaSingapore

UKUSA

Indian Model - Similar to that of Australia & New Zealand

Meaning of Fringe Benefits

“An Additional benefit” to an employee in addition to regular salary or wages

Benefits are enjoyed collectively and can not be attributed to individual employee

It does not include perquisite on which tax has already been paid or payable by the employees

Fringe Benefit Tax

It is a “Presumptive tax”

Benefit is presumed even if expenses are not necessarily incurred on the employees

Applicable to following Employers:(w.e.f. F. Y. 2005 - 2006)

A Company A Firm An AOP or a BOI A Local Authority Every Artificial Juridical person, not

falling within any of the above

The Following entities would also be liable to pay FBT:

Loss making employers

Employers whose income is fully exempt under section 10 / 10A / 10B of the Act

Employers getting assessed to IT under the presumptive provision (e.g. sec. 44AD/ 44AE/ 44AF)

An Individual A HUF An AOP / BOI whose income is eligible

for exemption U/s 10(23C) or which is registered as Fund or Trust

Central Govt. A State Govt.

Not Applicable to the following Employers :

Interest-free or concessional loan

Meals, lunch, refreshment, etc.

Travelling, touring, accommodation

Gift, voucher, token Credit Card Club Use of Movable asset Transfer of movable asset

Perquisites taxable in the hands of Employees (Up to FY 2004-2005)

Perquisites taxable in the hands of Employees (From FY 2005-2006)

Interest-free or concessional loan

Use of Movable asset Transfer of movable

asset

BASIS OF CHARGE Fringe benefits are provided or deemed to be provided

by an employer to his / its employees during the previous year in the course of business

FBT = 33.66% (30% + SC of 10%+ EC of 2%) of Value of FB

FBT is not applicable if a person does not have any employee during the previous year

ISSUES & IMPLICATIONS

FBT is a tax on expenditure and not a tax on income

FBT to be paid even when there is no income chargeable to income tax.

FBT is not deductible business expenditure

ADVANCE PAYMENT OF FBT

Quarter ending 30th June – 15th July

Quarter ending 30th Sept – 15th Oct

Quarter ending 31st Dec – 15th Jan

Quarter ending 31st Mar – 15th Mar

“Books of Accounts Should be updated Online”

Interest for short / non-payment of advance tax of FBT

No Advance tax paid

Or

Short Payment of Advance tax

Interest = 1% p.m.

SEPARATE RETURN OF FBT TO BE FILED

DUE DATES:Company or Tax Audit cases - 31st OctoberIn any other case – 31st July

Penalty for failure to furnish return of FB: Rs. 100 per day

FRINGE BENEFIT

PART - A(Individual Benefit)

2 Types

Any free or concessional ticket provided to the employees or their family members for private journeys by the transport operators

Effective Tax = 33.66%(cost at which the same benefit is provided to the general

public) minus any recovery from the employee

Fringe Benefit - Part A

Contribution to an Approved Superannuation Fund for employees

Effective Tax = 33.66%

Fringe Benefit - Part A

DEEMED FRINGE BENEFIT

PART - B(Collective Benefit and cannot be attributed to

Individual employee)

16 Types

Deemed Fringe Benefit - Part B

Entertainment (6.732%)

Provision of hospitalityEffective Tax = 6.732% (1.683% - Hotel)

of every kind to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade

(DOES NOT INCLUDE food or beverages provided to employees in office or factory and any expenditure on or payment through paid vouchers which are not transferable and usable only at eating joints or outlets)

Deemed Fringe Benefit - Part B

Conference (6.732%)

(Excludes fee for participation by the employees in any conference)

[Any expenditure on conveyance, tour and travel (incl. Foreign travel), on hotel, or boarding and

lodging in connection with any conference shall be deemed to be expenditure incurred for the purpose of

Conference]

Deemed Fringe Benefit - Part B

Sales promotion including publicity (6.732%)

Excludes Advertisement expenses . - Of any form of Print (Incl. journals, catalogues or price lists) or

electronic media or transport system on holding of, or the participation in any press conference or

business convention, fair or exhibition on Sponsorship of any sports event or any other event organised

by any Govt. agency or trade association or body on any notice required to be published under any law / order of

a court / tribunal by way of signs, art work, painting, banners, awnings, direct

mail, electric, spectaculars, hoardings, bill boards, or by way of such other medium of advt.

by way of payment to any advertising agency for the above purpose`

Deemed Fringe Benefit - Part B

Employees’ Welfare (6.732%)

Excludes - any expenditure incurred or payment made

• to fulfill any statutory obligation or • mitigate occupational hazards or • provide first aid facilities in the hospital or• dispensary run by the employer

Deemed Fringe Benefit - Part B

Conveyance, Tour & Travel (Incl. Foreign travel)

Effective Tax = 6.732%(1.683% for Construction business, pharmaceuticals

business, computer software business)

Deemed Fringe Benefit - Part B

Use of hotel, Boarding & Lodging facilities

Effective Tax = 6.732%(1.683% for business of pharmaceuticals and business of

computer software)

Deemed Fringe Benefit - Part B

Repair, running (incl. Fuel), maintenance of motorcars & the amount of depreciation thereon

Effective Tax = 6.732%(1.683% for business of carriage of passengers or goods

by motorcar)

Deemed Fringe Benefit - Part B

Repair, running (incl. fuel), maintenance of aircrafts & the amount of depreciation thereon

Effective Tax = 6.732%(0% for business of carriage of passengers or goods by

Aircraft)

Deemed Fringe Benefit - Part B

Use of Telephone (incl. Mobile phone)(6.732%)

• Does not include expenditure on leased telephone lines

• Expenses on use of telephone installed anywhere and irrespective of purpose will be covered under FBT

Deemed Fringe Benefit - Part B

Maintenance of any accommodation in the nature of guest house (6.732%)

(Other than accommodation used for training purpose)

Deemed Fringe Benefit - Part B

Festival celebrations (16.83%)

Deemed Fringe Benefit - Part B

Use of health club and similar facilities (16.83%)

Deemed Fringe Benefit - Part B

Use of any other club facilities(16.83%)

Deemed Fringe Benefit - Part B

Gifts (16.83%)

Deemed Fringe Benefit - Part B

Scholarships (16.83%)

Deemed Fringe Benefit - Part B

Expenses related to employees but do not attract FBT

Employers contribution to PF / ESI / Gratuity

Medical reimbursement

Leave Travel Allowance

Transport AllowanceFoods and beverages to employees in factory or office or

through non-transferable coupons

% of commission on sales achieved by the employees

Sales incentives

All allowances and perquisites form part of salary

Tips to classify expenses in Tally

PurchasesFringe Benefit expensesTDS expensesInterestOthers

“Need to classify expenses under the above heads”