FRINGE BENEFIT TAX (FBT)

Road to FBT…….

FBT levied on Employer FBT levied on Employees

China
Hong Kong
Japan
Australia
Malaysia
Russia
New Zealand
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. 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)
Not Applicable to the following
Employers :

 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.
Perquisites taxable in the Perquisites taxable in the
hands of Employees (Up hands of Employees
to FY 2004-2005) (From FY 2005-2006)

 Interest-free or  Interest-free or
concessional loan concessional loan
 Meals, lunch,  Use of Movable asset
refreshment, etc.  Transfer of movable
 Travelling, touring, asset
accommodation
 Gift, voucher, token
 Credit Card
 Club
 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 October
In 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
 Fringe Benefit - Part A

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%

DEEMED FRINGE BENEFIT
PART - B
(Collective Benefit and cannot be attributed to
Individual employee)

16 Types
 Deemed Fringe Benefit - Part B

Entertainment (6.732%)
 Deemed Fringe Benefit - Part B

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 . -
 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%)
 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
Tips to classify expenses in Tally

Purchases
Fringe Benefit expenses
TDS expenses
Interest
Others

“Need to classify expenses under the above

heads”