Introduction • Rationale for FBT • The Finance Minister stated the following while introducing the FBT legislation: “Therefore, by the presumptive tax method what we are trying to do is to tax that part which is clearly a perquisite, clearly a benefit but which is going untaxed both in the hands of the employer and the employee…..” • FBT levy is necessary to ensure that fringe benefit taxation does not violate horizontal and vertical equity. • This levy would bring to tax benefits that are collectively enjoyed and are not capable of being attributed to an individual employee.
Introduction • Synopsis of the provisions • FBT is an “additional” income-tax payable by an ‘employer’ • FBT is a tax payable with effect from 1 April 2005, on • Fringe Benefits, and • Deemed Fringe Benefits • Fringe benefits are ‘deemed’ to have been provided to an employee in case an employer incurs specified expenditure • Perquisites on which tax is paid or payable by an employee are excluded from the ambit of FBT • FBT is leviable @ 30% (plus surcharge and education cess) on ‘value’ as prescribed
Introduction • Value prescribed is either 5%/20% / 50% / 100% of the total expenditure • Synopsis of the provisions • FBT is applicable to • Company • Firm • AOP or BOI • Local authority • Artificial juridical persons
Introduction • FBT not applicable to • An individual (whether or not books of accounts are audited) • A Hindu Undivided Family (whether or not books of accounts are audited) • A person whose income is eligible for exemption under section 10(23C) or registered under section 12AA • Central and State Governments • A political party • FBT is not a deductible business expenditure
FBT Amendments • No FBT on non transferable prepaid electronic meal cards usable only at eating joints • No FBT on the following expenses covered under staff welfare: • To provide crèche facility for employees’ children, • to sponsor a sportsman being an employee • to organise sports events for employees • No FBT on any expenditure for maintenance of guest house • Value of Fringe benefits for expenditure on festival celebrations reduced from 50% to 20%