Bizness Fringe%20benefits%20tax
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Bizness Fringe%20benefits%20tax Bizness Fringe%20benefits%20tax Document Transcript

  • Business Read on ................................... Fringe Benefits Tax made by the employer either directly or indirectly to the employees for any purpose, contributions by the employer to an approved superannuation fund as KenSource well as any free or concessional tickets provided by the employer for private journeys undertaken by the employees or their family members. S What are these fringe benefits that o what is the Fringe Benefit will be taxed? Tax and what has been its As per the finance bill, fringe benefits initial impact especially on shall be deemed to have been provided companies? The fringe if the employer has incurred any expense benefit tax or FBT, as it is or made any payment for any of the commonly referred to, proposes to tax following purposes: companies on the fringe benefits The Fringe Benefit Tax provided to its employees in addition to Entertainment imposed by the finance cash salary or wages paid. Any benefits minister in his latest budget Festival Celebrations or perks that employees (current or past) in February 2005 was seen to get as a result of their employment are Gifts be the biggest nightmare in to be taxed but in this case in the hands Use of club facilities the history of Indian taxation of the employer. Fringe benefits thus by many tax experts. The Provision of hospitality of every would include any compensation other introduction of this tax was kind to any person whether by way than wages, tips, health insurance, life seen to be quite harmful for of food and beverages or in any insurance and pension plans. the system, coming from P other manner, excluding food or Section 115 WB outlines the various Chidambaram who is beverages provided to the benefits to be classified as fringe considered to be one of the employees in the office or factory. benefits and includes any privilege, greatest tax reformers. Amount spent on the maintenance service, facility or amenity directly or Discretion, confusion and of a guest house indirectly provided by an employer to his frustration were expected employees (including former employees) Amount spent on conferences with no limit to the questions by reason of their employment. Fringe one could raise about it. Amount spent on employee welfare benefits also include reimbursements, 44 Advanc'edge MBA September 2005
  • Business Read on ................................... running and profits before tax. FBT so far also maintenance of accounts for just 6% of tax payable motorcars, for the quarter ended June 2005. Of aircraft or fuel the above 42 companies, only 7 are expenses has shelling out an FBT of more than Rs 1 been specified. crore. For just 4 out of the 42 Also for hotels, a companies, FBT has worked out to be lower percentage more than 5% of profit before tax. of expenses The initial phase suggests that there incurred on are no industry specific trends for Use of health club, sports and hospitality has been specified for FBT. For instance, TCS with a profit similar facilities purposes of calculating the liability under of Rs 578 crore has provided for Rs 9 Amount spent on sales promotion FBT. crore towards FBT. In contrast, Tata including publicity. Infotech, with a profit of Rs 23 crore, Who pays fringe benefit tax? Conveyance, tour and travel has set aside as much as Rs 1 crore. The proposal for FBT specifies that including foreign travel expenses Service companies like TCS, Infosys, an employer who is an individual or a Satyam, Wipro, HDFC Bank and Jet Hindu Undivided Family (HUF) engaged Hotel boarding and lodging Airways have topped the list of FBT in a business or profession, a company, Repairs, running and maintenance paying companies. a firm, any association of persons or of motor cars body of individuals, a local authority, a One of the reasons why FBT has Repairs, running and maintenance sole trader, or an artificial juridical failed to sting companies is a change of aircraft person is liable to pay this tax. in the compensation policy. For Consumption of fuel other than Initial reports suggested that the instance, till March 2005, Infosys industrial fuel fringe benefits tax would likely result in Technologies made monthly India Inc incurring an additional contributions under the Use of telephone expenditure of about Rs 25,000 crore. superannuation plan to a trust. From Scholarships awarded to children of With the June quarter results out for the new fiscal onwards, a substantial employees. almost a majority number of companies, portion of the monthly contributions it is now somewhat clear of how exactly Where the employer is engaged in the is being paid directly to employees. it is affecting corporate India. business of carriage of passengers or Only a nominal amount is being goods by motorcar or by aircraft, a lower contributed to the trust. Infosys in The June quarter results suggest percentage of expenses on repair, turn has kept its FBT outgo on the that FBT has not lower side though employees would be turned out to be such paying higher taxes now. a dangerous Unfortunately, a large number of phenomenon as was companies have opted at not being made out to be disclosing the provision of FBT. initially. For the 42 companies that have Prominent companies that have not so far made a provision disclosed provision made for FBT for FBT, it has cropped include ACC, Bajaj Auto, Hero Honda off a mere 1.1% of the Motors and Reliance Energy. 46 Advanc'edge MBA September 2005