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Circular

September 16, 2009

With reference to the Income Tax Rules, 1962 and the abolition of FBT for the year 2009-
2010, 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 Annualized Tax free Balance Value of Value of


option of value amount amount to coupons coupons to
coupon w.e.f. April, be added in already be issued
value 2009 Taxable issued as on
income date
(Rs./pm) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
1350 16200 16200 Nil 8100 8100
2700 32400 16200 16200 16200 Nil *
4050 48600 16200 32400 24300 Nil *
5400 64800 16200 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, namely-

Table II
VALUE OF PERQUISITE PER CALANDER MONTH
Sl. Circumstances Where cubic capacity of engine Where cubic capacity of
No. does not exceed 1.6 liters engine exceed 1.6 liters
(1) (2) (3) (4)
1 Where the motor
car is owned or
hired by the
employer and –
(a) is used wholly No value No value
and exclusively in Provided that the documents Provided that the documents
the performance of specified in clause (B) of this specified in clause (B) of this
his official duties sub rule are maintained by the sub-rule are maintained by the
employer employer

(b) is used Actual amount of expenditure Actual amount of expenditure


exclusively for the incurred by the employer on the incurred by the employer on
private or personal running and maintenance of the running and maintenance
purposes of the motor car during the relevant of motor car during the
employee or any previous year including relevant previous year
member of his remuneration, if any, paid by the including remuneration, if any,
household and the employer to the chauffeur as paid by the employer to the
running and increased by the amount chauffeur as increased by the
maintenance representing normal wear and amount representing normal
expenses are met or tear of the motor car and as wear and tear of the motor car
reimbursed by the reduced by any amount charged and as reduced by any amount
employer from the employee for such use. 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
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.
2 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 No value No value


reimbursement is Provided that the documents Provided that the documents
for the use of the specified in clause (B) of this specified in clause (B) of this
vehicle wholly and sub-rule are maintained by the sub-rule are maintained by the
exclusively for employer employer
official purposes

(ii)such Subject to the provisions of Subject to the provisions


reimbursement is clause (B) of this sub-rule, the contained in clause (B) of this
for the use of the actual amount of expenditure sub-rule, the actual amount of
vehicle partly for incurred by the employer as expenditure incurred by the
official purposes reduced by the amount specified employer as reduced by the
and partly for in Sl.No.(1)(c)(i) above amount specified in
personal or private Sl.No.(1)(c)(i) above
purposes of the
employee or any
member of his
household
3 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 No value
reimbursement is Provided that the documents Not applicable
for the use of the specified in clause (B) of this
vehicle wholly and sub-rule are maintained by the
exclusively for employer
official purposes
(ii) such
reimbursement is Subject to the provisions of Not applicable
for the use of the clause (B) of this sub-rule, the
vehicle partly for actual amount of expenditure
official purposes incurred by the employer as
and partly for reduced by an amount of Rs.600
personal or private
purposes of the
employee

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 motor-
car 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 non-
alcoholic 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. Date of journey Place of start Place visited K.M. travelled Expenditure Purpose

1 Add: Expenditure on maintenance (if any)


2 Add: Depreciation @ 10% of the cost of car
3 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