According to P. Chidambaram's announcement in the Lok Sabha, a FBT of
30% will be levied on 20% of the fringe benefit expense. In simpler
terms, FBT will work out to be 6% of the total amount.
But in end, the effective FBT turned out to be just 2% for regular
companies and 0.5% for special-category companies like IT and
pharmaceuticals. What's more, India Inc can avoid paying even this
minuscule amount of tax if their auditors certify an expense as a
genuine business expenditure.
According to industry sources, there will be 1.5 to 2% additional tax
burden to companies due to items covered under FBT account for about
10-15% of total corporate profits.
| Taxable |
Exempted |
| Use of
telephones, including mobile phones, the base for valuation will be
20% |
Expenses
on advertising |
| The base
for valuation of FBT will be 20% for expenses on entertainment,
hospitality, sales promotion and publicity, employee welfare,
conveyance, tour and travel (including foreign travel) and use of
hotels. |
Expenses
on leased lines will. |
| 50% for
expenses on festival celebrations, use of clubs, scholarships and so
on. |
Charitable
institutions, trusts and funds. |
| For
superannuation funds, FBT will be levied on the entire contribution
made by the employer for employees. |
Individuals
and Hindu Undivided Families (HUFs) engaged in a business or
profession. |
| Tax on
foreign tour and travel. Infosys, for instance, spend about 4% of
its revenues on foreign travel. Phone bills account for close to 1%,
another expense attracting the fringe benefit tax. |
Conference
expenses, only the fee for participation |
| Repairs
and maintenance of cars have also been brought under the purview of
fringe benefit tax now. The only saving grace is that only 5% of
maintenance costs for transport companies will now be subject to
FBT. |
Employee
welfare expense, only the expenses incurred to fulfil any statutory
obligation or to mitigate hazards or to provide first aid facility
that too only in a hospital or dispensary run by the employer. |
| Any
privilege, service or amenity provided directly or indirectly by an
employer by way of reimbursement or otherwise to employees will
attract FBT, which is to be paid by employers. |
Guest
houses for training. |
| Fifty
per cent of expenses on club facilities. |
Expenses
incurred due to sales promotions |
| Expenses
borne by companies on foreign travel of their employees will be
under the purview of FBT. FBT on travel expenses has been cut to 5%. |
Medical
expenses. |
| Any free
or concessional ticket provided by the employer for private journeys
of employees or their family members and any contribution to an
approved superannuation fund for employees will come under the
purview of FBT. |
Companies
that are loss making. |
| Expenditure
on employees welfare will attract FBT, but not the expenditure
incurred or payment made to fulfil any statutory obligation or
mitigate occupational hazard or provide first aid facilities in
hospital or dispensary run by employers. |
|
| Other
expenditures that will come under FBT are conveyance, tour and
travel including foreign travel, use of hotel, boarding and lodging
facilities, repair, running, maintenance of motor cars and aircraft
and the amount depreciation on them. |
|
| Maintenance
of any accommodation like guest house except those used for training
purposes, festival celebrations, use of health club and similar
facilities, use of any other club facilities, gifts and scholarships
will come under FBT. |
|
| |
Earlier
|
Now
|
| Use of
telephone (other than leased lines) |
10% |
20% |
| Entertainment |
50% |
20% |
| Scholarship
to children of employees |
Actual
|
50% |
| Hospitality |
50% |
20% |
| Maintenance
of accommodation like guest houses |
50% |
20% |
| Conference |
50% |
20% |
| Employee
welfare |
50% |
20% |
| Sales
promotion, including publicity |
50% |
20% |
| Festival
celebration |
50% |
50% |
| Gifts |
50% |
50% |
| Use of
club facilities |
50% |
50% |
| Use of
health clubs, sports and similar facilities |
50% |
50% |
Conveyance,
tour and travel,
including foreign travel |
20% |
20% |
| Hotel,
boarding and lodging |
20% |
20% |
| Repair,
running (including fuel), maintenance of motorcars and depreciation
thereon |
20% |
20% |
| Repair,
running (including fuel), maintenance of aircraft and depreciation
thereon |
20% |
20% |
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