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.
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