Dear All,
Please find enclosed a FAQ released by the finance ministry regarding FBT. A short one-page version is below.
The Union Finance Ministry has finally cleared the doubts regarding the fringe benefit tax (FBT). In a comprehensive clarificatory circular issued by the Ministry on Monday, it has sought to clear the doubts about what exactly will fall under FBT purview and what's not. The Ministry has issued a whole list of FAQs (frequently asked questions) about the new tax, which was introduced in Budget 2005.
As per the original definition, FBT is defined as a tax levied on non-salary type benefits provided by the company to its staff. It is a tax on the benefit provided to an employee or his associate in respect of his employment. It is the employer who is liable to pay FBT, not the employee. But this had raised a lot of doubts from several employers on what elements of expenses attract the tax. The new 39-page note seeks to quell the doubts.
What's exempt
* Non-transferable food vouchers used in eating joints or outlets.
* Discounts and rebates to wholesale dealers and customers.
* Incentives to distributors for achieving sales targets.
* Medical reimbursement up to Rs 15,000 by the employer.
* Contribution to approved gratuity fund or provident fund.
* Value of shares, debentures, or warrants allotted to employees under any Employees Stock Option plan.
* A Section 25 company (set up for charitable purposes, etc) would be outside the purview of the tax if the income is exempt under section 10 (23C) or if the company is registered under section 12AA of the Income-Tax Act.
* Law firms having retainer-relationship arrangements.
* Children's education allowance
* Transport allowance up to Rs 800.
* Selling commission and brokerages to direct marketing agents.
* Wholesale and retail margins.
* Incentives given to dealers.
* Credit card bonus points.
And what's taxed
* Leave travel concession or assistance not included within 'salary'.
* Entertainment including amusement, exhibition, performance, game, or sport.
* Expenditure on brand, brand ambassador, celebrity endorsement.
* Expenditure incurred on hotel stay, air tickets to customers/clients.
* Applicable to liaison offices of foreign companies in India if they employ people here.
* Reimbursement of expenditure on books and periodicals to employees.
* Expenditure on meetings/get-togethers of employees and families on non-festival occasions (including annual day).
* Fifty percent of expenses on guesthouses, conferences, and company clubs are perks.
* Ten percent of telephone expenses of employees.
* Twenty percent of fuel expenses of employees.
Regards
From India, Madras
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14Please find enclosed a FAQ released by the finance ministry regarding FBT. A short one-page version is below.
The Union Finance Ministry has finally cleared the doubts regarding the fringe benefit tax (FBT). In a comprehensive clarificatory circular issued by the Ministry on Monday, it has sought to clear the doubts about what exactly will fall under FBT purview and what's not. The Ministry has issued a whole list of FAQs (frequently asked questions) about the new tax, which was introduced in Budget 2005.
As per the original definition, FBT is defined as a tax levied on non-salary type benefits provided by the company to its staff. It is a tax on the benefit provided to an employee or his associate in respect of his employment. It is the employer who is liable to pay FBT, not the employee. But this had raised a lot of doubts from several employers on what elements of expenses attract the tax. The new 39-page note seeks to quell the doubts.
What's exempt
* Non-transferable food vouchers used in eating joints or outlets.
* Discounts and rebates to wholesale dealers and customers.
* Incentives to distributors for achieving sales targets.
* Medical reimbursement up to Rs 15,000 by the employer.
* Contribution to approved gratuity fund or provident fund.
* Value of shares, debentures, or warrants allotted to employees under any Employees Stock Option plan.
* A Section 25 company (set up for charitable purposes, etc) would be outside the purview of the tax if the income is exempt under section 10 (23C) or if the company is registered under section 12AA of the Income-Tax Act.
* Law firms having retainer-relationship arrangements.
* Children's education allowance
* Transport allowance up to Rs 800.
* Selling commission and brokerages to direct marketing agents.
* Wholesale and retail margins.
* Incentives given to dealers.
* Credit card bonus points.
And what's taxed
* Leave travel concession or assistance not included within 'salary'.
* Entertainment including amusement, exhibition, performance, game, or sport.
* Expenditure on brand, brand ambassador, celebrity endorsement.
* Expenditure incurred on hotel stay, air tickets to customers/clients.
* Applicable to liaison offices of foreign companies in India if they employ people here.
* Reimbursement of expenditure on books and periodicals to employees.
* Expenditure on meetings/get-togethers of employees and families on non-festival occasions (including annual day).
* Fifty percent of expenses on guesthouses, conferences, and company clubs are perks.
* Ten percent of telephone expenses of employees.
* Twenty percent of fuel expenses of employees.
Regards
From India, Madras
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