Sachin Gujar; Associates is a chartered accountant firm in Pune,India providing Assurance and Auditing, Taxation, Accounting, Company Law and Secretarial services, Consultancy and Financial Management services to a large and wide variety of clients in and outside India.

1. Author :
Sachin Gujar,
Chartered Accountant
Fringe Benefit Tax

2. FRINGE BENEFIT TAX UNDER CHAPTER XII - HFRINGE BENEFIT TAX UNDER CHAPTER XII - H
Rationale behind Fringe Benefit Tax (FBT)
• Directly attributable benefits are taxable as perk in the
hand of employee
• Collective enjoyment of benefits which may involve a
personal benefit, are taxable in the hand of employer
Meaning of Fringe Benefit (FB)
Side benefits that accompany or are in addition to a
person’s regular compensation
Amendment in Section 17(2)(vi) to exclude fringe benefits
provided in chapter XII – H
 There will be no change in the tax treatment of elements
chargeable under Salary except Perquisites
 Perquisites provided under Rule - 3 may be taken as exempt
in the hands of Employer

3. Definitions (Section – 115W)Definitions (Section – 115W)
(a) “Employer” includes –
 a company;
 a firm;
 An AOP/ BOI, excluding fund/ trust/ institution(s)
eligible for exemption under Section 10(23C) or
registered under Section 12AA
 A local authority and
 every artificial judicial person
( b) “Fringe benefit tax” or “tax” means the tax
chargeable under section 115WA.

4. Charge of FBT (Section – 115WA)Charge of FBT (Section – 115WA)
1. A fringe benefit tax be charged in respect of the fringe
benefits
– provided or
– deemed to have been provided by an employer to
his employees
– At the rate of thirty per cent on value of such fringe
benefits.
2. The tax on fringe benefits shall be payable even if no tax is
payable by employer under the Act.
Fringe Benefits have been divided into two parts
1. Fringe Benefits – defined under section 115WB(1)
2. Deemed Fringe Benefits (Presumptive nature of FBT i.e.
there need not be any benefit to employee except in
case of employees welfare ) – defined under section

5. FRINGE BENEFIT – Meaning & ValuationFRINGE BENEFIT – Meaning & Valuation
Fringe Benefit - Section – 115WB(1)
aa Any privilege, service, facility or amenity,Any privilege, service, facility or amenity,
directly or indirectly, provided by andirectly or indirectly, provided by an
employer to his employees whether by wayemployer to his employees whether by way
of reimbursement or otherwise (includingof reimbursement or otherwise (including
former employee or employees) by reason offormer employee or employees) by reason of
their employmenttheir employment
Since no basis provided, itSince no basis provided, it
is presumed that the entireis presumed that the entire
amount paid for provisionamount paid for provision
of privilege etc is taxableof privilege etc is taxable
bb Any free or concessional ticket provided byAny free or concessional ticket provided by
the employer for private journeys of thethe employer for private journeys of the
employees and their family members; andemployees and their family members; and
Price charged by employerPrice charged by employer
from public minus anyfrom public minus any
price recovered fromprice recovered from
employee.employee.
cc Any contribution by the employer to anAny contribution by the employer to an
approved superannuation fund in excess ofapproved superannuation fund in excess of
Rs.1,00,000 per employee per yearRs.1,00,000 per employee per year
100% of the actual100% of the actual
contributioncontribution
dd Any specific security or sweat Equity SharesAny specific security or sweat Equity Shares
allotted or transferred , directly or indirectly,allotted or transferred , directly or indirectly,
by employer free of cost or at concessionalby employer free of cost or at concessional
rate to its employee(s) (including its formerrate to its employee(s) (including its former
employee(s))employee(s))
Fair Market Value (FMV),Fair Market Value (FMV),
as determined by theas determined by the
method prescribed themethod prescribed the
Board, of the Security onBoard, of the Security on
the date of excise of optionthe date of excise of option
as reduced by amountas reduced by amount
recovered fromrecovered from
employee(s)employee(s)

6. FRINGE BENEFIT – Meaning & ValuationFRINGE BENEFIT – Meaning & Valuation
Deemed Fringe Benefit - Section – 115WB(2)
Nature of ExpenditureNature of Expenditure ValuationValuation
(%age of total Expenditure)(%age of total Expenditure)
aa EntertainmentEntertainment 20%20%
Entertainment may include – cocktail parties, staff social functions etc.Entertainment may include – cocktail parties, staff social functions etc.
bb Provision of hospitability of every kindProvision of hospitability of every kind
excludingexcluding
a.a. foods and beverage provided infoods and beverage provided in
office or factory andoffice or factory and
b.b. food vouchers redeemable atfood vouchers redeemable at
eating joints.eating joints.
Employer being in business of hotelEmployer being in business of hotel
or carriage of passengers or goodsor carriage of passengers or goods
by aircraft or ship - 5%by aircraft or ship - 5%
Others - 20%Others - 20%
Hospitality means entertaining guests or strangers in a kind and generous wayHospitality means entertaining guests or strangers in a kind and generous way
Hotel means a place which is accessible by public or particular section thereof andHotel means a place which is accessible by public or particular section thereof and
where meals say breakfast/ lunch/ dinner, are provided.where meals say breakfast/ lunch/ dinner, are provided.
 Food and Beverages provided at Training Centre not owned by EmployerFood and Beverages provided at Training Centre not owned by Employer
cc Conference excluding fee forConference excluding fee for
participation by employee in anyparticipation by employee in any
conferenceconference
20%20%

7. FRINGE BENEFIT – Meaning & ValuationFRINGE BENEFIT – Meaning & Valuation
Conference means a formal meeting for discussion or debateConference means a formal meeting for discussion or debate
All expenditure on conveyance, tour and travel (incl. foreign travel), hotel,All expenditure on conveyance, tour and travel (incl. foreign travel), hotel,
boarding and lodging in connection with conference except fee for participation,boarding and lodging in connection with conference except fee for participation,
shall be includedshall be included
In house employee conference – covered under FBTIn house employee conference – covered under FBT
dd Sale promotion including publicity excludingSale promotion including publicity excluding
i)i) Expenditure on advertisementExpenditure on advertisement
ii)ii) Expenditure on Distribution of samples either free orExpenditure on Distribution of samples either free or
at concessional ratesat concessional rates
iii)iii) Expenditure by way of payment to any person ofExpenditure by way of payment to any person of
repute for promoting sales of goods or servicesrepute for promoting sales of goods or services
20%20%
Sale Promotion is a form of promotion which encourage customers to buySale Promotion is a form of promotion which encourage customers to buy
products by offering incentives such as contests, coupons, samples, free gifts etc.products by offering incentives such as contests, coupons, samples, free gifts etc.
Publicity means brand related communication between entity and public.Publicity means brand related communication between entity and public.
Selling Expenditure – not coveredSelling Expenditure – not covered
ee Employee welfare excluding expenditure to fulfill statutoryEmployee welfare excluding expenditure to fulfill statutory
obligation or mitigate occupational hazards or provide firstobligation or mitigate occupational hazards or provide first
aid facilities in the hospital or dispensary run by employeraid facilities in the hospital or dispensary run by employer
20%20%

8. FRINGE BENEFIT – Meaning & ValuationFRINGE BENEFIT – Meaning & Valuation
Deemed Fringe Benefit - Section – 115WB(2)
Employee Welfare may include:Employee Welfare may include:
Waiver of Loan given to employeesWaiver of Loan given to employees
Transport facility to Children of employeesTransport facility to Children of employees
Group health insurance schemeGroup health insurance scheme
 Medical Reimbursement to be included upto Rs.15,000 per employee per yearMedical Reimbursement to be included upto Rs.15,000 per employee per year
ff ConveyanceConveyance Employer being in business ofEmployer being in business of
construction or software developmentconstruction or software development
or pharmaceuticals - 5%,or pharmaceuticals - 5%,
Others - 20%Others - 20%
It cover local conveyance paid to employee for visiting other place of workIt cover local conveyance paid to employee for visiting other place of work
gg use of hotel, boarding and lodginguse of hotel, boarding and lodging
facilitiesfacilities
Employer being in business ofEmployer being in business of
software development orsoftware development or
pharmaceuticals or carriage ofpharmaceuticals or carriage of
passengers or goods by aircraft orpassengers or goods by aircraft or
ship - 5%,ship - 5%,
Others - 20%Others - 20%

9. FRINGE BENEFIT – Meaning & ValuationFRINGE BENEFIT – Meaning & Valuation
hh Repair, running including fuel andRepair, running including fuel and
maintenance of motor cars includingmaintenance of motor cars including
depreciation thereondepreciation thereon
If employer being in businessIf employer being in business
of carriage of passengers byof carriage of passengers by
Motor Car - 5%Motor Car - 5%
others 20%others 20%
It covers – repair, running, fuel, maintenance and depreciation thereonIt covers – repair, running, fuel, maintenance and depreciation thereon
Expenditure on commercial vehicle – not coveredExpenditure on commercial vehicle – not covered
Lease rental, insurance, petrol bill reimbursement - coveredLease rental, insurance, petrol bill reimbursement - covered
ii Repair, running including fuel andRepair, running including fuel and
maintenance of aircrafts includingmaintenance of aircrafts including
depreciation thereondepreciation thereon
If employer being in businessIf employer being in business
of carriage of passengers byof carriage of passengers by
Aircraft - NILAircraft - NIL
Others 20%Others 20%
jj Use of telephone including cell phoneUse of telephone including cell phone
excluding leased telephone linesexcluding leased telephone lines
20%20%
Leased Line means dedicated line for office use and used for transfer of data.Leased Line means dedicated line for office use and used for transfer of data.
Office telephone, telephone provided at the residence, mobile phone – coveredOffice telephone, telephone provided at the residence, mobile phone – covered
under FBTunder FBT
kk Maintenance of guest house other thanMaintenance of guest house other than
used for training purposesused for training purposes
20%20%
It does not include – repair, depreciation on Guest House and interest paid toIt does not include – repair, depreciation on Guest House and interest paid to
acquire Guest Houseacquire Guest House

10. FRINGE BENEFIT – Meaning & ValuationFRINGE BENEFIT – Meaning & Valuation
ll Festival CelebrationsFestival Celebrations 50%50%
mm Use of Health club and similar facilitiesUse of Health club and similar facilities 50%50%
nn Use of other club facilitiesUse of other club facilities 50%50%
OO GiftsGifts 50%50%
pp ScholarshipsScholarships 50%50%
QQ Tour and Travel including Foreign TravelTour and Travel including Foreign Travel 5%5%
SECTION – 115WB(3)
For the purpose of Section – 115WB(1), any privilege, service, facility
or amenity does not include perquisites in respect of which tax is paid
or payable by the employee or any benefit or amenity in the nature of
free or subsidies transport or any other allowance provided by
Employer to his Employees on to or from journey from residence to
office of the Employees.

11. PROCEEDURE FOR FILING RETURN – SECTION 115WDPROCEEDURE FOR FILING RETURN – SECTION 115WD
- For Companies and other entities whose accounts are to be audited
– 31st October
- For others - 31 July
 One Month from the date of issue of notice where AO issues notice
to a defaulting employer.
 A defaulting employer may file return up to one year from the end of
relevant assessment year or before the completion of assessment
whichever is earlier.
 A revise return can be filed up to one year from the end of
assessment year
Same proportion, same due dates and same method of computing
interest for delay in payment of advance tax on Income - will apply to
advance FBT.
Interest @ 1% per month or part of the month, is to be paid for short
fall in tax for the period for which the short fall continues
ADVANCE TAX – SECTION 115WJADVANCE TAX – SECTION 115WJ

12. OTHER PROCEEDURAL REQUIREMENTSOTHER PROCEEDURAL REQUIREMENTS
1. Assessment (Section – 115WE)
2. Best Judgment Assessment (Section – 115WF)
3. Fringe Benefit Escaping Assessment (Section – 115WG)
4. Issue of notice where Fringe Benefits have escaped
assessment (Section – 115WH)
5. Payment of Fringe Benefit Tax (Section – 115WI)
6. Advance Tax in respect of Fringe Benefits (Section –
115WJ)
7. Interest for default in furnishing return (Section – 115WK)
8. Application of other provisions of this Act (Section –
115WL)

13. THANK YOUTHANK YOU