Fringe Benefit Tax

FRINGE BENEFIT TAX Navin Jagwani

Introduction to Fringe Benefit Tax..!!!!

Requirement For Fringe Benefit Tax U/S-115WA  The FBT is payable by an Employer.  The Employer is liable only if he has an Employee.  Employer is liable only if he has provided Fringe Benefit and/or is deemed to have provided Fringe Benefit to his employees.  FBT is payable at the Rate of 30% (plus applicable Surcharge plus Education Cess) of the Value of Fringe Benefit Provided.  FBT is payable irrespective of whether “Employer” is liable to pay Income-Tax on his total income or

Definition Of Employer U/S-115W(a) Employer Includes:

Employer Excludes:

• Company. • Individual & HUF. • Firm. • Fund/Trust/Institutio n eligible for • Association of persons Exemption u/s-10(23). or a Body of individual. • Fund/Trust/Institutio • A local authority ns registered u/s• Every artificial 12AA Juridical Person. • A Political Party registered u/s 29A

Computation of Fringe Benefit Tax Liability & Rates. • 30% on the Value of Fringe Benefit- u/s-115WC Rates • Add:- Surcharge: • For AOP/BOI: If FB does not exceeds 1000000 Nil If FB exceeds 1000000 10% • Artificial.J.Person,Domestic Co.,Firm 10% 2.5% • Non-Domestic Co. Nil • Local Authority Add:- Education Cess: 2% on [Tax Surcharge]

Fringe Benefit Expenses..!!! • Covered u/s-115WB(1) • Any Privilege, Service, Facility or Amenity Whether provided Directly or Indirectly, or whether by way of reimbursement to Employee.. • Any Free or Concessional Ticket provided by the employer for private Journeys of the employee’s or his family. • Expenses spent towards contribution in Superannuation Fund.. Which is exempted upto the limit of 100000

Deemed Fringe Benefit..!!! Covered u/s-115WB(2) • • • • • • • •

Entertainment. Provision of Hospitality. Conference. Sales Promotion & Publicity. Employee’s Welfare. Conveyance. Use of Hotel, Boarding, Lodging Facilities. Repairs,Running,Maintenan ce of Motor Car & the amount of Depreciation thereon (including Fuel)

• Repairs,Running,Maintenance of Aircrafts & the amount of Depreciation thereon (including Fuel). • Telephones (including Mobiles) • Guest House. • Festival Celebrations. • Health Club. • Other Club Facilities. • Gifts. • Scholarships • Tour & Travels (including Foreign travels)

“Entertainment” u/s115WB(2)(A) Rate-20% •

• • • •

Includes: Exp in-connection with exhibition, performance,amusement, game or sports. Reimbursement of expenses. Exp on non-festive occasions. Purchase of ticket for charity Shows,sports event. Exp on Firecracker on Annual day.

Excludes: • Exp on festiveoccasion

“Provision for Hospitality” u/s-115WB(2)(B) Rate-20% • • • • • •

Includes: Food & Beverages After office hours. In-house training. other than employees with in office. In hotel businessdrinks to customer as welcome drink. Training center(temporary)

Excludes: • To employees with in office or factory. • Paid vouchers • Training center – (permanent)

“Conference” u/s-115WB(2)(C) Rate-20% Includes: • Conveyance, tour, travel on hotel or boarding & lodging in connection to a conference. • Programs organized by Trade bodies or institutions. • Complementary exp to participation fee. • Conference for agent & dealers.

Excludes: • Fee’s for participation by em’ee in any conference.

“S.P & Publicity” u/s115WB(2)(D) Rate-20% • • • •

Includes: If research done by own self for market or product. Free offers,free samples of products,exp on artwork or royalty. Winning trips by customer or client (travel+lodging+boarding) Distribution of free trade samples.

• • • • • • •

Excludes: Brokerage & selling Com. Exp on salesman(being em’ee) Rebates,discount & bonus points on credit card. Incentives to distributor. Market or product research from outside agency. Exp on call centers as post sale services. Exp on ad-films.

“Employee’s welfare” u/s115WB(2)(E) Rate-20% •

• • • • • • •

Includes: Group personal accidents/ workmen compensation insurance/ group health insurance/ group medical n life insurance (under nonstatutory obligation). Reimbursement by em’er on medical treatment not exceeding 15000. Injuries Subsidy Various exp in em’ees colony. Book & periodical to em’ee Prize, rewards, awards. Transport facility.

• • • • •

Excludes: Payment against Statutory obligation. Gratuity fund Medical exp above 15000 Treatment of injuries-”statutory obligation” Construction site.

“Conveyance” u/s-115WB(2)(F) Rate-20% • • • •

Includes: Exp for clients business reimbursed. Leave travel concession Reimbursement of car exp. Rent paid for operating lease.

Excludes: • Allowance for journey from home to work place. • Allowance • Professional travels. (reimbursement)

“Use of Hotel, Boarding & Lodging Facilities”u/s-115WB(2)(G) Rate-20% Includes: • Pre-diem allowance. • On hotel, boarding, lodging.

Excludes: • Fixed hotel allowance.

“Repairs, Running, Maintenance of Motor Car” u/s-115WB(2)(H) Rate-20% • • • • • • • •

Includes: Repairs. Running(including fuel). Maintenance. Depn on motor cars. Lease rent – financial lease Garage rent Drivers salary Int. on loan.

• • • • • • • • •

Excludes: Car excludes: Delivery vans Display vans Tempos Trucks Buses Tractor Ambulance But includes Jeep.

“Repairs,Running,Maintenance of Aircraft” u/s-115WB(2)(I) Rate20% • • • • • • • •

Includes: Repairs. Running(including fuel). Maintenance. Depn on Aircrafts. Lease rent – financial lease Garage rent salary Int. on loan.

Excludes: • For em’er engaged in carriage of passengers/ goods.

“Telephones(including Mobile)” u/s-115WB(2)(J) Rate-20% Includes: • All except exclusions.

Excludes: • Exp on leased Telephones.

“Guest house” u/s-115WB(2)(K) Rate-20% • • • • •

Includes: Food in G.H Contract charges Rent Maintenance charges Rent or Hire charges to hotel if stay exceeding 182 days.

Excludes: • Exp on refrigerator, t.v, furniture, etc • Depreciation on G.H • Maintenance exp for training purpose.

“Festival Celebrations” u/s-115WB(2)(L) Rate-50% Includes: Excludes: • Meeting/get • On independence together on festive day or republic day. occasions.

“Use of health club & similar facility” u/s-115WB(2)(M) Rate-50% • Includes: • Hotel resort providing health & fitness facility. • Subscription for membership in club • Fitness centers, health saloon, gymnasium, massage centers, slimming center, aerobics.

• Excludes:

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“Use of any other Club facility” u/s-115WB(2)(N) Rate-50% Includes: • Entrance fee • Reimbursement of exp

Excludes: • Depreciation on club building • Fixed club allowance.

“Gifts” u/s-115WB(2)(O) Rate-50% • • • • • •

Includes: In cash In kind Trade promotion scheme (with different product) Customers Marriage or others Any other person.

• Excludes: -------

“Scholarship” u/s-115WB(2)(P) Rate-50% Includes: • To em’ees & others. • Em’ees sent to educational institutions. • Awarded to student or trainee.

Excludes: -------

“Tour,Travel (Including Foreign Travel)” u/s-115WB(2)(Q) Rate-5% Includes: • Only traveling fair can be claimed.

Excludes:

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Industry Specific Amendments..!!! Employers engaged in the business of: Hotel Construction Manufacture n Production of Pharmaceutical. Manufacture n Production of Carriage of Computer Passengers/goods Software. by Motor Car Carriage of Passengers/goods by Aircraft.

Hospitali Conveya Hotel Repairs, ty nce Boardin running, g& Maintena lodging nce n 5% Depn 5% 5% 5% 5%

5%

5%

5%

5%

5%

5%

NIL

Other Propositions..!!!-1 • Employer is a must. • No segregation of expenses incurred on em’ees or others. • Capital or Revenue Expenditure. • Preoperative Expense. • Expenditure to be Calculated on Due Dates • Net expenses to be considered in case of recovery from employees. • Cost Sharing agreement with group companies. • Disallowance u/s-37,40,40A & 43B.

Other Propositions..!!!-2

• Bogus Expenditure. • FBT in case of depreciation. • Reimbursement of expenditure by Client. • Accounting Records. • FBT not Deductible – as per sec – 40(a)(ic). • FBT deductible for computing Book Profits-[115JB] • Credit of FBT Paid by a foreign co. in the country of residence

Advance Tax due date..!!! Quarter

Due Dates

Apr-Jun

On or before 15th July

July-Spet

On or before 15th Oct

Oct-Dec

On or before 15th Jan

Jan-Mar On or before 15th Mar(Before the quarter ends)

Section List Sections List 115WA Requirements of FBT 115WB Fringe Benefit Expenses 115WC Value of Fringe Benefits 115WD(1 Return of FB ) Assessment 115WE Best Judgment Assessment 115WF FB Escaping Assessment 115WG Issue of notice where FB have Escaped 115WH Assessment 115WI Payment of FBT 115WJ Advance Tax in respect of FB 115WK Interest for default in furnishing return 115WL of FB Application of Other provisions of this

Updations…!!! Companies SBI IOC RIL ICICI HLL SAIL BHARTI TCS ITC TISCO

Top 10 FBT Payers of India FBT(fig in cr) As % of employee expense. 88.5 38.9 37 36.9 35 26.5 25.5 17.8 16.1 16

1.1 1.5 3.1 2.3 5.4 0.5 2.2 0.3 2.5 1.1

Case Laws…!!! • Infosys – dating exp reimbursed by em’er • kingfisher airways & Air deccan: Indirect benefits provided

"Awake, Arise and Stop not , till the goal is achieved."

Thank You! By – Navin Jagwani