Impact On It For 2009-10

Circular September 16, 2009 With reference to the Income Tax Rules, 1962 and the abolition of FBT for the year 20092010, the following changes have been introduced: 1. Conveyance Reimbursement a) Executives who have vehicle owned by them and the expenses on Monthly Fuel & Maintenance (as conveyance reimbursement) are given the company, need to maintain a log book in the format attached (Annexure 3) along with this circular on monthly basis. This needs to be duly approved by the immediate superior. The same needs to be submitted to the respective payroll administrator by 15th of the subsequent month. In case the logbook is not received by the payroll administrator by 15th of the subsequent month, the Monthly Fuel & Maintenance Reimbursement will be considered as taxable income. b) Executives who have company owned vehicle which is used partly in the performance of duties and partly for private or personal purposes and the expenses on Fuel & Maintenance are given or reimbursed by the company, will have to pay Income Tax on Rs.1200 p.m. (for the vehicle up to 1600 CC plus Rs.600 p.m., if chauffeur is also provided to run the vehicle) or Rs.1600 p.m. (for the vehicle more than 1600 CC plus Rs.600 p.m., if chauffeur is also provided to run the vehicle) The extract of Income Tax Rule to this effect is given in Annexure I. Monthly Fuel & Maintenance (Conveyance Reimbursement) Amount: For Four Wheeler: An Executive, who uses motor car (company owned or self owned), can choose component towards reimbursement of expenses incurred on commuting between residence & place of work as well as for official purpose. The maximum amount which can be opted by the executive shall be as follows: A7 & above

Rs 20,000 per month

A4 – A6

Rs 15,000 per month

A1 – A3

Rs 12,000 per month

For Two Wheeler: An Executive, who uses two wheeler (company owned or self owned), can take

an

amount up to Rs.5000 per month towards reimbursement of expenses incurred on commuting between residence & place of work as well as for official purpose.

2. Food Vouchers (Food Coupons) In view of the changes in the Income Tax clause 3 (7) (iii), for Food Coupons, (Sodexo Coupons) the distribution of the food coupons will be as follows: Exiting option coupon value (Rs./pm) 1350 2700 4050 5400 • •

Annualized of value

(Rs.) 16200 32400 48600 64800

Tax free amount w.e.f. April, 2009 (Rs.) 16200 16200 16200 16200

Balance Value of Value of amount to coupons coupons to be added in already be issued Taxable issued as on income date (Rs.) (Rs.) (Rs.) Nil 8100 8100 16200 16200 Nil * 32400 24300 Nil * 48600 32400 Nil *

Note: The value of the balanced coupons not issued as per the above table will be added to the Special Personal Allowance (SPA) of the CTC. The coupons issued in excess of Rs.16200 will be considered as taxable income in the hands of employees.

The extract of Income Tax Rule to this effect is given in Annexure 2. The coupons which are already issued shall not be taken back. 3. Club Membership Fee & Expenditure Benefit to the employee resulting from the payment or reimbursement by the Company of any expenditure incurred, including the amount of annual or periodical fee, in a club by him, shall be determined to be the actual amount of expenditure incurred or reimbursed by the company on that account. The amount so determined shall be reduced by the amount, if any paid or recovered from the employee for such benefit or amenity. The extract of Income Tax Rule to this effect is given in Annexure 2.

Sanjeev Bhatia

ANNEXURE - I Valuation of perquisites: 3. (2) Use of Motor car The value of perquisite provided by the way of use of motor car to an employee by an employer, who is not liable to pay fringe benefit tax under Chapter XII-H of the Act, shall be determined in accordance with the following Table, namelyTable II VALUE OF PERQUISITE PER CALANDER MONTH Sl. Circumstances Where cubic capacity of engine No. does not exceed 1.6 liters (1) (2) (3) 1 Where the motor car is owned or hired by the employer and – (a) is used wholly No value and exclusively in Provided that the documents the performance of specified in clause (B) of this his official duties sub rule are maintained by the employer (b) is used exclusively for the private or personal purposes of the employee or any member of his household and the running and maintenance expenses are met or reimbursed by the employer

Actual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use.

Where cubic capacity engine exceed 1.6 liters (4)

of

No value Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer Actual amount of expenditure incurred by the employer on the running and maintenance of motor car during the relevant previous year including remuneration, if any, paid by the employer to the chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use.

(c) is used partly in the performance of duties and partly for private or personal purposes of his own or any member of his household and (i) the expenses on Rs.1200 (plus Rs.600, if Rs.1600 (plus Rs.600, if maintenance and chauffeur is also provided to run chauffeur is also provided to running are met or the motor car) run the motor car) reimbursed by the

2

3

employer (ii) the expenses on Rs.400 (plus Rs.600, if chauffeur running and is provided by the employer to Rs.600 (plus Rs.600, if maintenance for run the motor car) chauffeur is also provided to such private or run the motor car) personal use are fully met by the employee. Where the employee owns a motor car but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are met or reimbursed to him by the employer and (i)such reimbursement is for the use of the vehicle wholly and exclusively for official purposes

No value Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer

No value Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer

(ii)such reimbursement is for the use of the vehicle partly for official purposes and partly for personal or private purposes of the employee or any member of his household Where the employee owns any other auto-motive conveyance but the actual running and maintenance are met or reimbursed to him by the employer and (i) such reimbursement is for the use of the

Subject to the provisions of clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by the amount specified in Sl.No.(1)(c)(i) above

Subject to the provisions contained in clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by the amount specified in Sl.No.(1)(c)(i) above

No value Provided that the documents Not applicable specified in clause (B) of this

vehicle wholly and exclusively for official purposes (ii) such reimbursement is for the use of the vehicle partly for official purposes and partly for personal or private purposes of the employee

sub-rule are maintained by the employer Subject to the provisions of Not applicable clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by an amount of Rs.600

Provided that where one or more motor cars are owned or hired by the employer and the employee or any member of his household are allowed the use of such motor-car or all or any of such motor-cars (otherwise than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount calculated in respect of one car in accordance with Sl.No.(1)©(i) of Table II as if the employee had been provided one motor-car for use partly in the performance of his duties and partly for his private or personal purposes and the amount calculated in respect of the other car or cars in accordance with Sl.No. (1)(b) of Table II as if he had been provided with such car or cars exclusively for his private or personal purposes. (B)Where the employer or the employee claims that the motor-car is used wholly and exclusively in the performance of official duty or that the actual expenses on the running and maintenance of the motor-car owned by the employee for official purposes is more than the amounts deductible in Sl.No 2(ii) or 3 (ii) of Table II, he may claim a higher amount attributable to such official use and the value of perquisite in such a case shall be the actual amount of charges met or reimbursed by the employer as reduced by such higher amount attributable to official use of the vehicle provided that the following conditions are fulfilled :(a) the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage and the amount of expenditure incurred thereon. (b) the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties. Explanation – For the purposes of this sub-rule, the normal wear and tear of a motorcar shall be taken at 10% per annum of the actual cost of the motor-car or cars.

ANNEXURE - 2 3. (7) (iii) Valuation of perquisites on Food Coupons: The value of free food and non-alcoholic beverage provided by the employer, who is liable to pay fringe benefit tax under Chapter XII-H of the Act, to an employee shall be the amount of expenditure incurred by such employer, The amount so determined shall be reduced by the amount, if any, paid or recovered from the employees for such benefits or amenity. Provided that nothing contained in this sub-rule shall apply to free food and nonalcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof in either case does not exceed Rs.50 per meal or to tea or snacks provided during working hours provided in a remote area or an offshore installation.

3. (7) (vi) (A) Valuation of perquisites on Reimbursement of Club Membership Fee and Expenditure: The value of benefit to the employee resulting from the payment or reimbursement by the employer, who is not liable to pay fringe benefit tax under Chapter XII-H of the Act, of any expenditure incurred (including the amount of annual or periodical fee) in a club by him or by any member of his household shall be determined to be the actual amount of expenditure incurred or reimbursed by the company on that account. The amount so determined shall be reduced by the amount, if any paid or recovered from the employee for such benefit or amenity. However, where the employer has obtained corporate membership of the club and the facility is enjoyed by the employee or any other member of his household, the value of the perquisite shall not include the initial fee paid for acquiring such corporate membership.

Annexure 3 Reimbursement of Vehicle expenses Name of the employee: Payroll No.: Vehicle No: Make: Capacity: Cubic capacity does not exceed / exceeds 1.6 ltr. Log Book for the month of:__________________________ Sr No.

1 2 3

Date of journey

Place of start

Place visited

K.M. travelled

Expenditure

Purpose

Add: Expenditure on maintenance (if any) Add: Depreciation @ 10% of the cost of car Add: Driver's salary (if any)

Total Note: The above expenditure includes to and fro travel from residence to office.

Signature of the employee Name of the employee:

This is to certify that the above expenditure has been fully and exclusively incurred for the performance of official duty.

Signature of the superior: Name: Designation