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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
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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”