|
Please list the employee benefits on which Fringe Benefit Tax is levied. Also suggest how it is to be computed.
T G Ramesh — Employees get many benefits from their employers. If a benefit is fully attributable to an employee, it is taxed in the hands of the employee. When the benefits are enjoyed collectively by the employees and cannot be attributed to individual employees, they are taxed in the hands of the employer; this tax is called Fringe Benefit Tax (FBT). An employer is liable for FBT even if it does not have any income that is chargeable under the Income Tax Act. FBT is imposed on the following:
- For expenses under entertainment, employee welfare, conferences, conveyance, company cars, sales promotion, hospitality, hotels & lodging, telephones and maintenance of accommodation, 20 percent of the total amount is taxable.
- For expenses under festival celebrations, use of health clubs and other clubs, gifts and scholarships, 50 percent of the total amount is taxable.
- For tours, travels and foreign travel expenses, 5 percent of the total amount is taxable (value as per section 115WC).
- For any free or concessional ticket provided by the employer for the private journeys of its employees or their family members, 100 percent of the cost minus any recovery from the employees.
- For any contribution by the employer to an approved superannuation fund for employees, 100 percent of the amount in excess of Rs 1,00,000 for each employee.
- For any specified security or sweat equity share allotted/transferred to an employee free of cost or at a concessional rate, 100 percent of the fair market value of the specified security or sweat equity share on the date on which the option vests with the employee minus the amount actually paid by the employee.
FBT is not payable on the employer’s contribution to any approved gratuity or provident fund. Expenses incurred in providing subsidized transport facilities to employees will not be subject to tax, neither will house rent allowance or rent-free accommodation. Under most circumstances, no FBT needs to be paid for leave travel allowance.
Expenditure incurred on non-transferable paid vouchers usable at eating places is not subject to FBT. Certain types of advertisement expenditure have also been granted exemption, as have discounts, rebates, bonuses, value points and the likes. The expenditure incurred on product marketing research, and call center charges for canvassing sales, are also outside the purview of FBT. Expenses on first-aid facilities, and on schools that are run exclusively for employees’ children, will not be taxed as fringe benefits.
The value of the fringe benefits is taxable at 30 percent and an additional 3 percent education cess on the total tax amount. For companies with a turnover of over Rs 1 crore, there is an additional 10 percent surcharge on the 30 percent tax.
For depositing FBT (0026) or Banking Cash Transaction Tax (0036), use Challan no ITNS 283. The annual return is filed on form ITR 8.
The due date for the return of FBT for a company, business or profession (non-corporate) where the books of accounts are required to be audited is September 30. For all others, the due date is July 31.
The total FBT for the year is payable in advance in installments, as under:
- On or before June 15, 15 percent of the FBT for the year.
- On or before September 15, 45 percent of the FBT for the year for corporate assessees and 30 percent for non-corporate assessees.
- On or before December 15, 75 percent of the FBT for the year for corporate assessees and 60 percent for non-corporate assessees.
- On or before March 15, 100 percent of the FBT for the year for corporate and non-corporate assessees.
Advance FBT is to be paid even if the tax is less than Rs 5,000.
Is there any legal protection against employee poaching by vendors and distributors?
Vinaya — The Indian constitution considers the right to earn one’s livelihood a fundamental right, hence there is no law in the country that can prevent a professional from joining and working for another company. The question of legal protection therefore does not exist.
However, as a precautionary measure, companies sign up contractual agreements with employees that require them to serve a certain notice period or pay a penalty in case the employee is not in a position to serve the agreed notice period. Many companies also put in a non-compete clause that prevents their employees from joining a competing organization for a certain period.
However, these employee contracts don’t usually stand the test of law simply because the law believes that no employment contract can put any kind of restraint on individuals (employees) to earn their livelihood.
Despite this, it’s prudent to sign such contracts with employees. They may not be very effective legally, but they do serve as a psychological barrier. The agreement must clearly mention the notice period, and the penalty in case of premature exit.
With respect to poaching by vendors and customers, it is wise to have non-poaching clauses as part of the standard agreements you sign with them while initiating a partner or customer contract. In cases where there is a non-poaching agreement, you could claim material damages against the party that breaches the agreement.
We have a portfolio of software products that address the statutory reporting for service tax, excise, e-TDS, VAT, EOU, SEZ, etc. We have more than 10,000 users of our products, and a set of 26 partners. But the market for such products is so huge that we have not even covered one percent of the total market. How we can price and market the product so as to expand our market reach.
Arun Dixit,
Udyog Software India, Mumbai
Gururaj — Let me answer the pricing question first. Usually, pricing of a product is decided on the following factors—prevailing price of competing products, profits you want to earn, and your growth plans. There is no ideal pricing unless you find out how much buyers willing to pay for your kind of software. Take Tally as an example, study their pricing strategy, and arrive at the right price.
From the market coverage perspective, it may make sense for you to tie up with 3-4 auditors and tax consultants in each state who could promote your products to their clients. From a channel point of view, I think your product has a wide market. Every business establishment, small or big, will require your product(s), so expand your channel to have at least one partner in each district, if not in every city.
From the marketing point of view, there are plenty of Web sites on matters related to finance and taxation. Promote your products on relevant web sites through ads or trial downloads. You can also set up your own web site where you can make available trial versions of your software. Anyone, who downloads the trial version, becomes a prospect. You could also participate in forums and conferences on matters related to taxation. Finally, use your existing customers to help spread positive word-of-mouth among their peers and associates.
Who is legally liable in case of warranty service issues? In a couple of instances, our customers, who had warranty problems with their IT products bought from us, have threatened to take us to consumer court. On our part we have done our best to resolve the issues, but there have been delays at the vendor’s end.
Yogesh Parab,
Pratiksha Computers, New Delhi
T G Ramesh — Technically speaking, any legal course can be binding only between two transacting parties—in this case, between the buyer and the seller. Since you are the seller, the law makes you legally liable for not meeting warranty terms. But if you clearly document in your bill that you are only the seller, and that the installation and/or warranty services will be made available to you by the vendor or its service providers, then you may not be held legally liable for lapses in meeting warranty commitments.
Disclaimer: The views and opinions expressed by the panel of experts in this section are solely their own and neither reflect the opinions of their respective companies nor those of the editor and publisher of CRN and UBM India Pvt. Ltd.
page
1
l 3 l
Post your Query
|