Welcome to session on Welcome to session on

Fringe Benefit Tax Fringe Benefit Tax ScopeScope

AndAnd

Financial Implications Financial Implications

ContentsContents

PresentationPresentation

Improvement planned in gathering Improvement planned in gathering data for FBTdata for FBT

Questions /Answer TimeQuestions /Answer Time

Brief OverviewBrief OverviewIntroduced by Finance Act,Introduced by Finance Act, 20052005 and applicable and applicable

from from FY FY

2005-06.2005-06.

Rationale behind FBT is to tax benefits that are Rationale behind FBT is to tax benefits that are collectively collectively enjoyed by employees (enjoyed by employees (not taxed in not taxed in their their handshands) and ) and certain deemed fringe benefits.certain deemed fringe benefits.

FBT is payable by employer at tax rates applicable FBT is payable by employer at tax rates applicable for for the the financial year on the value of Fringe financial year on the value of Fringe Benefits Benefits (Applicable (Applicable Rate for FY Rate for FY 07-0807-08 is is 30% 30% + Surcharge + Cess+ Surcharge + Cess))

FBT is chargeable on defined % of total expenses FBT is chargeable on defined % of total expenses falling falling under each category defined by the Finance under each category defined by the Finance Act.Act.

Valuation of Fringe BenefitsValuation of Fringe BenefitsDescription of Fringe BenefitDescription of Fringe Benefitss ValueValue

(in (in %)%)

Any privilege, service facility provided directly or Any privilege, service facility provided directly or indirectly, provided by the employee either through indirectly, provided by the employee either through reimbursement or otherwise. (reimbursement or otherwise. (to his employees including former employees)

100100

Any free or concessional tickets provided by the Any free or concessional tickets provided by the employer for private journeys undertaken by the employer for private journeys undertaken by the employees or their family members; (excluding that employees or their family members; (excluding that included in LTA/LTC)included in LTA/LTC)

100100

Employer’s contribution to an approved Employer’s contribution to an approved Superannuation Fund;Superannuation Fund;

100100

Fringe benefits shall be deemed to have been provided by an employer if any expense is incurred or payment made for the following purposes: Entertainment;Entertainment; 2020Provision of hospitalityProvision of hospitality 2020ConferenceConference 2020Sales Promotion including publicitySales Promotion including publicity 2020Employees’ welfareEmployees’ welfare 2020

Valuation of Fringe Benefits Valuation of Fringe Benefits (contd..)(contd..)

Description of Fringe BenefitDescription of Fringe Benefitss ValueValue(in %)(in %)

ConveyanceConveyance 2020Use of hotel, boarding and lodging;Use of hotel, boarding and lodging; 2020Repair, running (including fuel), maintenance Repair, running (including fuel), maintenance of motor cars and the amount of depreciation of motor cars and the amount of depreciation thereon;thereon;

2020

Use of Telephone (including mobile phone, and Use of Telephone (including mobile phone, and other than expenditure on leased telephone other than expenditure on leased telephone lines;lines;

2020

Maintenance of any accommodation in the Maintenance of any accommodation in the nature of guest housenature of guest house

2020

Festival Celebrations;Festival Celebrations; 5050Use of health club and similar facilities;Use of health club and similar facilities; 5050Use of any other club facilities;Use of any other club facilities; 5050Gifts; andGifts; and 5050ScholarshipsScholarships 5050Tour & Travel including (Foreign Travel)Tour & Travel including (Foreign Travel) 55

Contribution to Contribution to Superannuation FundSuperannuation Fund

ExcludesExcludes

The amount of Contribution whichThe amount of Contribution which

does not exceeds does not exceeds 1 1 Lakh rupees inLakh rupees in

respect of each employee.respect of each employee.

EntertainmentEntertainmentIncludes Expenditure forIncludes Expenditure for

ExhibitionsExhibitions PerformancePerformance AmusementsAmusements Games/SportsGames/Sports Meetings/Get together of employees and Meetings/Get together of employees and

their family on non festive occasionstheir family on non festive occasions

For affording some sort of amusements and For affording some sort of amusements and gratificationgratification..

ConferenceConferenceA training Programme entails congregation of number A training Programme entails congregation of number

ofofperson for discussion or exchange of views.person for discussion or exchange of views.

IncludesIncludes

Expenses for attending Expenses for attending training/conference outside factory/office training/conference outside factory/office such as Hotel, Travelling, Conveyancesuch as Hotel, Travelling, Conveyance

Dealers and Vendors Conference.Dealers and Vendors Conference.

ExcludesExcludes

In house training of EmployeesIn house training of Employees Participation fees of employees in any Participation fees of employees in any

outside conference/training outside conference/training

Provision for HospitalityProvision for Hospitality

IncludesIncludes Every kind of provision for hospitality Every kind of provision for hospitality

through food or beverages or in any through food or beverages or in any other manner.other manner.

ExcludesExcludes Expenditure on Food or Beverages provided by Expenditure on Food or Beverages provided by

Employer to Employees in Office or Factory. Employer to Employees in Office or Factory.

Expenditure on Non-Transferable Food Expenditure on Non-Transferable Food Coupons Coupons

Sales Promotion including Sales Promotion including publicitypublicity

IncludesIncludes

Expenses for Free offers (with products) Expenses for Free offers (with products) such as freebies like tattoos, cricket cards such as freebies like tattoos, cricket cards or similar products to trade or consumers.or similar products to trade or consumers.

ExcludesExcludes

Advertisement in any print or electronic Advertisement in any print or electronic media or transport system.media or transport system.

Holding or participation in any press Holding or participation in any press conference, fair, exhibition or convention.conference, fair, exhibition or convention.

Sales Promotion including Sales Promotion including publicitypublicity

Exclusions ContinuedExclusions Continued

Publication of any notice (under any law, Publication of any notice (under any law, Court or Tribunal order) in any print or Court or Tribunal order) in any print or electronic media.electronic media.

Advertisement through Signs, art work, Advertisement through Signs, art work, painting, banners, direct mail, Electric painting, banners, direct mail, Electric spectaculars, kiosks, hoardings, bill spectaculars, kiosks, hoardings, bill boards or by way of such other medium.boards or by way of such other medium.

Payment to any advertising agency for Payment to any advertising agency for the purposes of above mentioned the purposes of above mentioned expendituresexpenditures..

Sales Promotion including Sales Promotion including publicitypublicity

Exclusions ContinuedExclusions Continued Sponsorship of sports event or any other Sponsorship of sports event or any other

event organized by Govt agency or any event organized by Govt agency or any trade association trade association

Expenditure on distribution of free Expenditure on distribution of free samples of Medicines or of Medical samples of Medicines or of Medical equipments to Doctor equipments to Doctor

Expenditure by way of payment to any Expenditure by way of payment to any person of repute for promoting the sale of person of repute for promoting the sale of goods or servicesgoods or services

Sales Promotion including Sales Promotion including publicitypublicity

Exclusions ContinuedExclusions Continued Brokerage and Selling CommissionBrokerage and Selling Commission Reimbursement of Salesman (Expenses)Reimbursement of Salesman (Expenses) Sales Discount, Rebates allowed to whole Sales Discount, Rebates allowed to whole

sale dealers, customers or bonus points sale dealers, customers or bonus points given to Credit Card Customers.given to Credit Card Customers.

Incentives to Distributors.Incentives to Distributors. Product marketing research Expenses Product marketing research Expenses

(If Outsourced)(If Outsourced) Call Center Charges for canvassing Sales Call Center Charges for canvassing Sales

and carrying out post sale activities.and carrying out post sale activities.

Employees WelfareEmployees WelfareIncludesIncludes Group Health/Accident/Medical/Life Group Health/Accident/Medical/Life

Insurance, Workman Compensation Insurance, Workman Compensation Insurance. (if Statutory not required)Insurance. (if Statutory not required)

Medical Reimbursement up to limit of Medical Reimbursement up to limit of 15000/-.15000/-.

Reimbursement of late night snacks to Reimbursement of late night snacks to employees.employees.

Uniform if not statutory requiredUniform if not statutory required Reimbursement of Expenditure on Books and Reimbursement of Expenditure on Books and

PeriodicalsPeriodicals Prizes/Rewards (Non Monetary )to EmployeesPrizes/Rewards (Non Monetary )to Employees Transportation facility to children of Transportation facility to children of

Employees.Employees.

Employees WelfareEmployees Welfare

Inclusions (Continued)Inclusions (Continued) Expenses on treatment of Injuries during Expenses on treatment of Injuries during

working hours in a hospital not maintained working hours in a hospital not maintained by employer if statutorily not required.by employer if statutorily not required.

Subsidy to school not meant exclusively for Subsidy to school not meant exclusively for employee’s children.employee’s children.

Gardening, Site cleaning, Light Decoration, Gardening, Site cleaning, Light Decoration, School, Library, Mess, Television, Cable School, Library, Mess, Television, Cable Connection etc in Employees Colonies.Connection etc in Employees Colonies.

Employees WelfareEmployees Welfare

ExcludesExcludes

Payment for Statutory Payment for Statutory Obligation/Mitigate occupational Obligation/Mitigate occupational Hazards or provide first Aid facility or Hazards or provide first Aid facility or Dispensary Maintained or run by Dispensary Maintained or run by employer.employer.

Expenses in Hospital /Dispensary Expenses in Hospital /Dispensary maintained by employer for injuries maintained by employer for injuries during working hours.during working hours.

ConveyanceConveyanceIncludesIncludes

Reimbursement for Car Expenses on basis of Reimbursement for Car Expenses on basis of bills submitted, Driver Salary on Declaration.bills submitted, Driver Salary on Declaration.

Lease Rentals of the vehicles on Operating Lease Rentals of the vehicles on Operating Lease.Lease.

ExcludesExcludes

Free or Subsidized transport provided to Free or Subsidized transport provided to employees for Journey from Home to Office employees for Journey from Home to Office Back Back

Hotel Boarding and Hotel Boarding and LodgingLodging

IncludesIncludes

All Hotel ExpensesAll Hotel Expenses

Pre-Diem Allowance paid to Pre-Diem Allowance paid to employees for meeting Hotel employees for meeting Hotel Expenses. (Daily Allowance)Expenses. (Daily Allowance)

Running/Maintenance of Running/Maintenance of Motor CarMotor Car

IncludesIncludes Expenses on Repair and Maintenance of Expenses on Repair and Maintenance of

Motor CarsMotor Cars Lease rentals for Finance Lease of Cars.Lease rentals for Finance Lease of Cars. Depreciation of Vehicles on Pro-rata Depreciation of Vehicles on Pro-rata

basisbasis Interest on Loan for CarsInterest on Loan for Cars Driver’s salaryDriver’s salary Garage and Parking slots rent Garage and Parking slots rent

Running/Maintenance of Running/Maintenance of Motor CarMotor Car

ExcludesExcludes

Expenses for Delivery/ Display Expenses for Delivery/ Display Vans trucks/Lorries ,ambulance Vans trucks/Lorries ,ambulance and tractorand tractor

Use of TelephoneUse of Telephone

IncludesIncludes Payments for Mobile PhonePayments for Mobile Phone Payment of any Telephones in the Payment of any Telephones in the

office/Factory.office/Factory.

Excludes Excludes Payment made for Leased Telephone Payment made for Leased Telephone

Lines.Lines.

Guest HouseGuest House

IncludesIncludesRent for Guest HouseRent for Guest HouseAny Accommodations in Nature Any Accommodations in Nature

of Guesthouse of Guesthouse Food at Guest HouseFood at Guest HouseMaintenance charges of Guest Maintenance charges of Guest

HouseHouseContract Charges for Contract Charges for

Guesthouse StaffGuesthouse Staff

Guest HouseGuest House

Excludes Excludes Capital Expenditure in Guest Capital Expenditure in Guest

HouseHouse

Depreciation on Guest HouseDepreciation on Guest House

Festival CelebrationFestival Celebration

Includes Includes Meeting of Employees or their Meeting of Employees or their

families on the occasion of Navratri, families on the occasion of Navratri, Diwali, ID, Christmas, New Year.Diwali, ID, Christmas, New Year.

Excludes Excludes Celebration Expenses of Celebration Expenses of

Independence Day & Republic Day.Independence Day & Republic Day.

Use of Club and Similar Use of Club and Similar FacilityFacility

IncludesIncludes

Entrance Fees or Membership Entrance Fees or Membership Fees of ClubFees of Club

ExcludesExcludes

Depreciation on Club Building if Depreciation on Club Building if owned by Employerowned by Employer

GiftsGifts

Any Thing Given or Presented without Any Thing Given or Presented without Consideration.Consideration.

IncludesIncludes Gifts under Trade Scheme for Promotion of Gifts under Trade Scheme for Promotion of

Company’s ProductCompany’s Product Gifts to CustomersGifts to Customers Gifts to Employees (On any Occasion)Gifts to Employees (On any Occasion) Gifts in Kind (At Cost)Gifts in Kind (At Cost)

ScholarshipsScholarships

IncludesIncludes

Education of Employees sent to Education of Employees sent to Education InstituteEducation Institute

Expenses Incurred /Paid for Expenses Incurred /Paid for Scholarships either to Employees or Scholarships either to Employees or any other Person.any other Person.

(Student and Trainees)(Student and Trainees)

Tour & Traveling (Including Tour & Traveling (Including Foreign)Foreign)

IncludesIncludesPayments made for Traveling for Payments made for Traveling for

any Employee or any purpose.any Employee or any purpose.

ExcludesExcludesPayments made for Traveling for Payments made for Traveling for

the purpose of Conference the purpose of Conference Payment for LTC/LTA to Payment for LTC/LTA to

Employees.Employees.

Important Notes for FBTImportant Notes for FBT Employer EmployeeEmployer Employee Relation is Prerequisites Relation is Prerequisites

for the Levy of FBTfor the Levy of FBT Proximate PurposeProximate Purpose to be looked for the to be looked for the

Classification under different clause.Classification under different clause. Includes Includes

Pre-operative ExpensesPre-operative ExpensesCapital ExpensesCapital ExpensesReimbursementsReimbursementsProvisions for the ExpensesProvisions for the Expenses

Not Applicable for Advance payments.Not Applicable for Advance payments.

Thank YouThank You