Fringe Benefit Tax (FBT):

The term fringe benefit is defined to mean any consideration by way of:

“Any privilege, service, facility or amenity directly or indirectly provided by an employer, whether by way of reimbursement or otherwise to an employee or former employee”.

Any free or concessional ticket provided by the employer for the private journey of an employee or a member of his family.

Any contribution made by an employer to an approved superannuation fund for employees

Who are all covered ?

It is payable by a firm, a company, an AOP, a BOI, a local authority or an artificial juridical person (exempted are: Individual, HUF, fund and trust)

What it includes ?

It includes ALL official expenses incurred for the staff. For example, if the company incurs expenditure on the travel of an employee, it is covered under FBT, IN SPITE OF THE FACT THAT IT IS FOR THE OFFICIAL PURPOSES.

It includes capital expenses also. For example, if a DVD player or a fridge is purchased and placed in office for the use of employees, it is covered under FBT and the company has to pay tax on it.

Computation:

The method of computation of the value of fringe benefits for the levy of FBT is the aggregate of:

 Cost of free or concessional tickets for private journeys of employees or their family members: Cost at which it is provided to the general public reduced by the amount paid or recovered from the employee.

 Contribution to approved superannuation fund: Amount contributed

 Festival celebrations, use of health club or similar facilities, and use of other club facilities, gifts and scholarships: 50 per cent of the expenses.

 And 20 per cent of expenses in the case of:

a) Provision for hospitality of every kind by the employer to any person, whether by way of provision for 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, but does not include expenditure on or payment for, food or beverages provided by the employer to his employees in office or factory.

b) Expenses on conference other than expenses by way of fees for participation in the conference.

c) Sales promotion expenses, including publicity other than expenditure on advertisement.

d) Employee welfare expenses other than those incurred to fulfil a statutory obligation or to mitigate occupational hazards or provide first aid facilities.

e) Conveyance, tour and travel, including foreign travel.

f) Use of hotel, boarding and lodging facilities.

g) Repair, running (including fuel), maintenance of motorcars and amount of depreciation thereon.

h) Repair, running (including fuel), maintenance of aircrafts and amount of depreciation thereon.

i) Use of telephone, including mobile phone and internet charegs, other than expenditure on leased telephone lines.

j) Expenditure on guesthouse other than accommodation used for training purposes.

The tax is payable in respect of the value of fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year.

The value of fringe benefits so calculated is subject to additional income tax in respect of fringe benefits at the rate of 30 per cent (increased by the surcharge at 10 per cent and additional surcharge at 2 per cent on such tax and surcharge).

The fringe benefit tax is payable by the employer even where he is not liable to pay income-tax on his total income computed in accordance with the other provisions of this Act.

20% category:

a) Entertainment
b) Hospitality
c) Conference
d) Sales promotion including publicity
e) Employee welfare
f) Conveyance, tour and travel including foreign travel
g) use of hotel, boarding and lodging facilities
h) Repair, running, maintenace and depreciation on motor cars
i) Repair, running, maintenance and depreciation on air crafts
j) Use of telephone other than leased lines
k) Guest house

50% category:

i) Festival celebrations
ii) Use of health club and similar facilities
iii)Use of any other club facilities
iv) Gifts
v) Scholarship

100% category:

a) Superannuation
b) Leave Travel concession to the extent of the concession (actual minus recovered)