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Computation of Value of Fringe Benefits
[Submitted by Mr. Rupesh Shah, ACA, CWA]
NOTES:
1) Our FM has stated that fringe benefits tax is a tax on the
expenses incurred by the EMPLOYER ON EMPLOYEES The part of FM speech is
reproduced below
"I have looked into the present system of taxing perquisites and I
have found that many perquisites are disguised as fringe benefits, and
escape tax. Neither the employer nor the employee pays any tax on these
benefits which are certainly of considerable material value. At present,
where the benefits are fully attributable to the employee they are taxed
in the hands of the employee; that position will continue. In addition, I
now propose that where the benefits are usually enjoyed collectively by
the employees and cannot be attributed to individual employees, they shall
be taxed in the hands of the employer. However, transport services for
workers and staff and canteen services in an office or factory will be
outside the tax net. The tax is not a new tax, although I am obliged to
call it by a new name, namely, Fringe Benefits Tax. The rate will be 30
per cent on an appropriately defined base."
However the deeming section (Sec 115WB(2) states otherwise:
"(2) The fringe benefits shall be deemed to have been provided by the
employer to his employees, if the employer has, in the course of his
business or profession (including any activity whether or not such
activity is carried on with the object of deriving income, profits or
gains) incurred any expense on, or made any payment for, the following
purposes, namely:- "
The amount on which to calculate FBT is not clear. Bills/invoices
include element taxes & duties (Sales Tax, Service Tax, Excise). There
maybe instances that the said duty or tax maybe claimable as CENVAT or
credit (vat). So what amount we have to take. The actual expense amount we
have debited in our expense account or the actual bill amount inclusive
of tax/duties. In case of latter it will tantamount to Tax on Tax.
The section will Deem any exp incurred on the below mentioned heads to
be for employees.
Now the intention of FM as per his speech clearly states that he wishes
to tax only those benefits which are enjoyed collectively by the employee
.However in light of the above discrepancies a analysis of impact of FBT
on our Co.
2) Colony & Expenses on Colony :
Not a Taxable fringe benefit - Since a taxable Rent Free Perquisites
in employee hand.
3) Payment to Canteen Expenses / Mess Exp / Security Mess :
Not a Taxable fringe benefit - Sec 115WB (2)(B) (ii) Explanation)
4) Payment for Dormitory Exp / Den Subsidy :
Taxable FBT on Dormitory Exp- Head: Guest House Expenses
Taxable FBT on Den Subsidy - Head: Amenity Main Section
5) School Running Expenses :
Not a Taxable fringe benefit - Since a taxable Rent Free Perquisites in
employee hand.
6) Hospital & Dispensary Expenses:
Not a Taxable fringe benefit - Sec 115WB (2)(E) Explanation)
7) Joining Expenses / Transfer Expenses - Fare - Transportation
Hotel - Others
Disputed - Could be taxable FBT under Conveyance, Tour Travel, Hotel
8) Uniform Expenses:
Taxable FBT - Head: Amenity (Main Section) or Employee Welfare
9) Safety Expenses:
Not a Taxable fringe benefit - Sec 115WB (2)(E) Explanation)(Statutory)
10) Mediclaim Insurance & Group Mediclaim Insurance:
Taxable FBT - Head: Employee Welfare
(Not taxable under main section as it is not a privilege, service,
facility or amenity)
11) Workmen Compensation Insurance:
Taxable FBT - Head: Employee Welfare
(Not taxable under main section as it is not a privilege, service,
facility or amenity)
12) Conference & Seminar Expenses:
Taxable FBT - Head: Conference & Seminar
(Note Participation fees of employee not taxable, Travel, boarding lodging
exp. Taxable.)
13) Mason / Dealer Meets:
Taxable FBT - Head: Publicity
(It is not possible to show it as business convention, fair or exhibition)
The expenses of organizing are shared between the Co. & SP. Our share is
taxable.
The expenses is included in Seminar & Conference in our accounts
Also the GIFTS & SOUVENIRS given at these meetings are also taxable.
14)Staff Training Exp.:
Not a Taxable FBT
15) Contribution to Welfare Clubs:
Taxable FBT - Head: Other Club
16) Staff Welfare:
Taxable FBT - Head: Employee Welfare
17) Recruitment Expenses (Tickets, Hotels, Fooding Exp.):
Not a Taxable FBT: Employee Employer relation not present. However the
deeming section maybe applied and taxable under Provision of hospitality:
For Fooding & Guest House Conveyance, tour and travel: For tickets
reimbursements, conveyance etc
18) Advertisements - In Newspaper/Magazines/Signboards etc:
Not a Taxable FBT:
19) Travelling / Conveyance Inland :
Taxable FBT - Head: Conveyance & Use of Hotel
20) Traveling Others - Relates to traveling & boarding /Lodging
other than employees:
Taxable FBT - Head: Conveyance & Use of Hotel (Deeming provision
applicable)
21) LTA :
Not a Taxable fringe benefit - Since a taxable Perquisites in employee
hand. Moreover it is exempted u/s 10 in the hands of employees
22) Reimbursement of Motor Vehicle Claim (Both owned/employees
vehicle):
Taxable as FBT - Repair, Running, fuel, & dep. On motor Vehicle)
Dep will be as per I. Tax Act
23) Running & Maintenance of Vehicles / Others :
Taxable as FBT - Repair, Running, fuel, & dep. On motor Vehicle)
It is to be noted the vehicles can be used totally in plants
24) Vehicles Hire Charges - Includes taxi charges etc for Co.
employees and Co. Guests:
There is a dispute under which head it is to be taxed. Under:
Conveyance or Under: Repair, Running, maintenance of motorcars. Also this
head contains service tax, which we claim as cenvat There can be a dispute
on whether it is taxable at all since not given to employee
25) Bus Running Expenses :
This head contains expenses of 2 nature No specific exemption is given
under the head Conveyance for this regard, which is in conflict with
intention of FM and hence taxable.
a) Buses trips used for bringing employees to office & back.
Taxable as FBT: Head: Conveyance
b) Bus Trips used for bringing School children /colony personals
Taxable as FBT: Head: Employee Welfare
(Note School running Exp is Perquisites & Not a Taxable FBT.)
Since the billing is done in the name of Co. In my opinion it will not be
treated as for school running exp. As the school is a different entity
altogether)
26) Telephones- Office /Residents/Mobiles/Reimbursements of Tel Exp:
Taxable as FBT, Under: Telephone
(Note: Leased line telephone is not taxable - It will include high
bandwidth
lines used for Internet.) Fax is also to be excluded.
27) Newspaper & Periodicals:
Disputed it is a business expense.
28) Membership fees for Clubs
Taxable as FBT Under: Club fees
29) Membership fees for Credit Cards
Taxable as FBT Under: Main Section @ 100%
30) Community Welfare Expenses - Disputed
Not Taxable As FBT since not related to Employees.
31) Guest House Maintenance Exp :
Taxable as FBT Under: Guest House
Note: Whether Rent/Depreciation is also to be included under the word
"Maintenance". Dep. should not be added, as it is not separately mentioned
as in case of Motorcar
32) Entertainment Exp:
Taxable as FBT Under: Employee Welfare
33) Insurance of Vehicles:
Taxable As FBT Under motor Cars
Note: It will include both the employers & employees motorcars
34) Garden Expenses:
Disputed May come under Employee welfare
35) Gifts & Presentation:
Taxable as FBT Under Gifts
Note: Whether given to any other persons will also be taxable.
36) Puja Expenses:
Taxable as FBT Under: Employee Welfare
37) Contribution to Staff Club :
Taxable as FBT Under: Club facilities
38) Contribution to approved Superannuation Fund :
Taxable as FBT Under: Main Section
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