FRINGE BENEFIT TAX (FBT)

Road to FBT……. FBT levied on EmployerFBT levied on Employees Australia New Zealand China Hong Kong Japan Malaysia Russia Singapore UK USA 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 )  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 :

ãInterest-free or concessional loan ãMeals, lunch, refreshment, etc. ãTravelling, touring, accommodation ãGift, voucher, token ãCredit Card ãClub ãUse of Movable asset ãTransfer of movable asset Perquisites taxable in the hands of Employees (Up to FY ) Perquisites taxable in the hands of Employees (From FY ) ãInterest-free or concessional loan ãUse of Movable asset ãTransfer 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 30 th June – 15 th July Quarter ending 30 th Sept – 15 th Oct Quarter ending 31 st Dec – 15 th Jan Quarter ending 31 st Mar – 15 th 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 - 31 st October In any other case – 31 st 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 hospitality Effective 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. - ãOf any form of Print (Incl. journals, catalogues or price lists) or electronic media or transport system ãon holding of, or the participation in any press conference or business convention, fair or exhibition ãon Sponsorship of any sports event or any other event organised by any Govt. agency or trade association or body ãon any notice required to be published under any law / order of a court / tribunal ãby way of signs, art work, painting, banners, awnings, direct mail, electric, spectaculars, hoardings, bill boards, or by way of such other medium of advt. ãby 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 Allowance Foods 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 Purchases Fringe Benefit expenses TDS expenses Interest Others “Need to classify expenses under the above heads”