Tax Supplement 1
ASSESSMENT OF FRINGE BENEFITS
1. Whether the following expenses, incurred by an employer, are chargeable to Fringe Benefit
Tax? If yes, please specify the head of chargeability.
(i) Salaries paid to employees including drivers of motor car.
(ii) Food and beverages provided to employees (including employees of foreign collaborator/
customers in office/ factory or reimbursement of food and beverages expenses to employees
in off ice/factory.
(iii) Reimbursement of lunch expenses of field staff on outdoor duties.
(iv) Festival allowance/gift to employees/customers/distributors.
(v) Sports events organised for employees and their annual get-together.
(vi) Amusement facilities in off ice/factory like TV, music system/refrigerator, etc.
(vii) Local transportation for employees/customers/distributors.
(viii) Party arranged in Taj Hotel for distributors/customers.
(ix) Tours and travels including foreign travels for attending conference and partcipation fees
for the conference.
(x) Workshop and seminar.
(xi) AGM and board meetings.
(xii) Brokerage/commission/discount/performance-based discount, etc. to selling agents/
distributors/wholesalers.
(xiii) Distribution of diaries/calendars with logo.
(xiv) Use of brand names.
(xv) Ad-films, hoardings and advertisement in print media.
Solution : Determining the chargeability of FBT AY 2009-2010 :
(i) Salaries paid to drivers of motor car are for the purposes of running and maintenance of
motor car. Accordingly, it is liable to FBT under clause ‘maintenance of motor car’ [Sec.
115WB(2)(H)] and it is valued @ 20% of the cost of the employer [Sec. 115WC(1)(c)]. Salaries
paid to employees are not chargeable to FBT.
(ii) Expenditure incurred on food or beverages procured by employers for providing to his
employees in an office or factory is exempt [Sec. 115WB(2)(B)(i)]. Food and beverages to
employees of foreign collaborator is liable to FBT. Exclusion applies where employer provides
food and beverages to his employees in off ice/factory. Employees of the foreign collaborator
are not covered.
(iii) It is liable to FBI under ‘Hospitality’ [Sec. 115WB(2)(B)] and it is valued @ 20% of the cost to
the employer
(iv) Festival allowance to employees is not chargeable to FBT as it is taxable in their hands as
“salary”. However, gift made by an employer to any person is chargeable to FBT under subclause
‘gift’ [Sec. 115WB(2)(O)] and it is valued @ 50% of cost of gift to the employer
[Sec. 115WC(1)(d)]
(v) Expenditure on employees get-together, sports events/ cultural programme for employees
fall under “Employee’s welfare” [Sec. 115WB(2)(E)] and liable to FBT. It is valued @ 20% of
the cost to the employer.
(vi) Expenditure on capital assets in respect of which depreciation is allowable under Sec. 32 is
not liable to FBT [Sec. 115WB(2)], except motor car and aircraft [FAQ-89]. Therefore, capital
expenditure on TV, music system, refrigerator etc. to provide entertainment, falling under
Sec. 115WB(2)(N) is not liable to FBT.
(vii) It is chargeable to FBT as “conveyance” under Sec.115WB(2)(F) and it is valued @ 20% of
cost to the employer under Sec. 115WC(1)(c).
2 Tax Supplement
(viii) It is chargeable to FBT as “provision of hospitality of every kind” under Sec. 115WB(2)(B). It
is valued @ 20% of the cost to the employer under Sec. 115WC(1)(c).
(ix) It is chargeable as ‘conference’ [under Sec. 115WB(2)(C)]. However, participation fee is not
chargeable to FBT. Conference expenses including tours/travels, boarding, lodging in hotel
are valued @ 20% of the cost to the employer [Sec. 115WC(2)(c)].
(x) It is chargeable to FBT as “conference” [under Sec. 115WB(2)(C)] and it is valued @ 20%
cost to the employer, under Sec. 115WC(l)(c).
(xi) Annual general meeting and board meeting are statutory in nature. These cannot be
considered as “conference” under Sec. 115WB(2)(C). Accordingly, the expenditure on holding
these meetings is not liable to FBT.
(xii) Brokerage, commission, discount, rebates, incentives etc. are selling expenses and do not
fall under “sales and publicity” [under Sec. 115WB(2)(D)]. Accordingly, these are not liable
to FBT.
(xiii) It is liable to FBT under “sales promotion including publicity” [Sec. 115WB(2)(D)]. It is valued
@ 20% of the cost to the employer [Sec. 115WC(1)(c)].
(xiv) It is liable to FBT as ‘sales promotion and publicity’ [Sec. 115WB(2)(D) and it is valued @
20% of the cost’ to the employer [Sec. 115WC(1)(c)].
(xv) Ad-films [FAQ-65], hoardings and advertisement in print media are excluded from the purview
of “sales promotion including publicity” and thus not liable to FBT.
2. Whether the following expenses, incurred during the year 2008-2009, are liable to FBT? If so,
determine the amount at which FBT would be charged.
(1) A five-star hotel in Bangalore, run by C Ltd., a foreign company, incurred the following expenses
on the New Year Celebrations:
Rs
(i) Purchased musical instruments 3,00,000
(ii) TV sets/coffee machines/fridges to entertain guests 3,00,000
(iii) Food, beverages and drinks 3,00,000
(iv) Cost of lighting/decoration 1,00,000
(v) Honorarium paid to cine stars/TV stars/singers to entertain customers/guests 8,00,000
(vi) Gifts/prizes to best dancing couples to attract more and more participation 1,00,000
(vii) Ad-firms 1,00,000
(2) A firm of Chartered Accountants deputed its senior-most partner to attend a conference, held
at Ontario, on Transfer Pricing & Accounting Standards and incurred the following expenditure:
Rs
(i) Participation fees 2,00,000
(ii) Foreign travel 4,00,000
(iii) Boarding and loading in a hotel 1,00,000
(3) An association of persons, a construction enterprise, having total receipts of Rs 40,00,000
during the year, deputed its Engineer to supervise construction project of its client at Sydney for
two weeks and incurred the following expenses:
(i) Air travel Rs.2,60,000
(ii) Boarding and lodging in hotel Rs.2,00,000
(iii) Participation fees in a seminar on latest construction techniques Rs.1,00,000
(4) Education scholarship given by a charitable trust, registered under Sec. 12AA of the Incometax
Act Rs.5,00,000.
Tax Supplement 3
Solution : Computation of the liability of FBT for the AY 2009 –2010
Category of Particulars of Expenditure Valuation Taxable
Employer Rule Value
1. Hotel run
by Z Ltd., a
foreign
company
(A) Entertainment [Sec. 115WB(2)(A) r.w. Sec,
115WC(1)(c)] (i) Musical instrument, T.V.,
Coffee machines and fridges to entertain
guests: Capital assets in respect of which
depreciation is available under Sec.
32, only depreciation is liable to FBT.
However, depreciation is liable for FBT only
in respect of motor cars and aircrafts.
— —
(ii) Honorarium to cine stars/TV star singers to
entertain customers/ guests
(B) Hospitality [Sec. 115WB(2)(B) r.w. Sec.
115WC (1)(c)]: Food, beverages and drinks.
(D) Sale promotion (including publicity) {Sec.
115WB(2)(D) r.w. Sec. 115WC(2)(c)]: Adfilms]
(L) Festival celeberations [Sec. 115WB(2)(L)
r.w. Sec. 115WC (2}(d)] Cost of lighting and
decoration
(O) Gifts and prizes to best dancing couples
FBT: 31.6725% of 275,000 and rounded off [Sec.
288B]
20% of 8,00,000 1,60,000
5% of 3,00,000 15,000
— —
50% of 1,00,000 50,000
50% of 1,00,000 50,000
27,000
87,099
2. Partnership
firm of
Chartered
Accountants
(C) Conference [Sec. 115WB(2)(C) r.w. Sec.
115WC(1)(c)] (i) Participation fee—exclusion
does not apply to partner as he is.not an
employee
(ii) Foreign travel
(iii) Boarding/ lodging in hotel
FBT: 33.99% of 1,40,000 and rounded off (Sec.
288B)
20% of 2,00,000 40,000
20% of 4,00,000 80,000
20% of 1,00,000 20,000
1,40,000
47856
3. Association
of persons,
engaged in
construction
activity
(C) Conference [Sec. 115WB(2)(C) r.w. Sec.
115WC(1)(c)]: Participation fee in seminar not
liable to FBT as the participent is an employee
(F) Tour and travel including foreign travel [Sec.
115WB(2)(F)]
(G) Use of hotel, boarding and lodging facility
[Sec. 115WB(2)(G) r.w. Sec. 115WC(1)(c)]
FBT: 30.9% of Rs 53,000 and rounded off (Sec.
288B)
Total income under Sec.44AD is 8% of Rs
40,00,000, i.e. Rs 3,20,000. As it does not exceed
Rs 10,00,000, no surcharge is payable by the AOP.
5% of 1,60,000 13,000
20% of 3,00,000 40,000
53000
16,377
4. Charitable
trust
(P) Scholarship [Sec. 115WB(2)(P) r.w. Sec.
115WC(1)(d)]
FBT: As the charitable trust is registered under
Sec. 12AA, it is not liable to FBT (Proviso to Sec.
115W]. Hence, tax liability is nil.
50% of 5,00,000 2,50,000
— —
4 Tax Supplement
3. ABC Ltd., an Indian company, operating airline, has incurred the following expenditure for its
employees in the course of its business during the PY 2008-2009:
Sr. No. Particulars of expenditure Amount
(Rs in crore)
1. Free/concessional tickets provided to employees (including employees 20
of its subsidiary airlines) and their family members for private
journeys—Value of concessions, net of recoveries
2. Entertainment 10
3. Hospitality 100
4. Employees welfare 20
5. Use of hotel for boarding and lodging 10
6. Repairs, running, maintenance and depreciation of coaches used to 50
take passengers to and from the airport
7. Repairs, running, maintenance and depreciation of aircrafts 500
8. Telephone expenses—for office use only 2
9. Interest on loan taken for purchasing aircrafts 10
10. Use of club facilities 30
Additional information:
1. Entertainment expenses include ‘entertainment allowances’ to employees: Rs 2 crore.
2. Hospitality includes an expenditure of Rs 10 crore on food, beverages provided to employees
in office and expenditure on non-transferable lunch vouchers usable only on eating joints.
3. Employees welfare expenses include employer’s contribution to recognised fund, Rs 4 crore
and scholarship Rs 1 crore.
4. Club facilities include the cost of club building purchased for Rs 10 crore. Depreciation under
Income-tax Rules amount to Rs 1 crore but depreciation for accounting purposes is Rs 1.5
crore.
5. Free/concessional ticket provided to the employees of subsidiary airline amount to Rs 4
crore.
Determine the liability of FBT for the assessment year 2009-2010.
Solution: Computation of the liability of FBT for the A.Y. 2009-2010
Sr. Expenditure on Fringe Benefits (Rs in crore) Valuation
No. amount of
Fringe Benefits
(Rs. in crore)
Free and concessional tickets provided to employees 20.00
[Sec. 115WB(1)(b)]:
1. Less: Tickets provided to the employees of subsidiary 4.00
16.00
Valuation at 100% of the cost to the employer 16.00
[Sec. 115WC(1)(a)]
Entertainment [Sec. 115WB(2)(A)] 10.00
2. Less: Entertainment allowance paid to employees is 2.00
taxable as salary under Sec. 17(1) in their hands. Hence,
it is excluded 8.00
20% of 8 crore [Sec. 115WC(1)(c)] 1.60
Hospitality [Sec. 115WB(2)(B): 100
Tax Supplement 5
3. Less: Payment for food or beverages provided by 10
employer to his employees in office on non-transferable
lunch vouchers to employees, usable on eating joints
20% of Rs. 90 crore [Sec. 115WC(1)(c)] 90 18.00
4. Employee welfare [Sec. 115WB(2)(E): 20
Less: (i) Contribution recognized fund, not liable to FBT (–) 4
(ii) Scholarship, not covered under this clause (–) 1
20% of Rs. 15 crore [Sec. 115WC(1)(c)] 15 3.00
5. Use of hotel, boarding and lodging [Sec. 115WB(2)(G)] 2.00
20% of 10 crore [Sec. 115WC(1)(c)]
6. Repairs, running, maintenance and depreciation of 500
coaches to take passengers to and from airport
[Sec. 115WB (2)(H)]. Coaches are not motor cars.
Therefore, no FBT can be charged.
7. Repairs, running, maintenance and depreciation of 10
aircraft [Sec. 115WB(2)(1)]
Add: Interest on loan taken to purchase aircraft: CBDT
has clarified that interest on loan taken to purchase
motorcars is liable to FBT. Comments, applicable to motor
car, would equally apply to aircraft. Accordingly, interest
on loan, taken to purchase aircraft, would also be liable
to FBT.
The valuation of this facility is taken at nil 510 Nil
[Sec. 115WC(2)(f)].
8. Telephone facility [Sec. 115WB(2)(J)] 20% of 2 crore 0.40
[Sec. 115WC(1)(c)]
9. Scholarship [Sec. 115WB(2)(P)]: 50% of 1 crore 0.50
[Sec. 115WC(1)(d)] Use of
10. Club facility [Sec. 115WB(2)(N)]: 30
Less: Cost of building 10
20
Add: Depreciation on club building under Income-tax
Rule: Where the legislature has intended to subject
the amount of depreciation on any capital asset to FBT,
it has specifically provided for it as in clause (H) and (1)
of Sec. 115WB(2). In absence of any legislative intent to
subject the amount of depreciation in respect of club
building to FBT, such depreciation amount is not liable to
FBT. Income-tax Rule Nil
50% of 20 crore [Sec. 115WC(1)(d)] 20 10.00
Total value of Fringe Benefits 51.50
FBT © 33.99% of 51.50 crore 17.5049
6 Tax Supplement
4. KP Ltd., provides the following fringe benefits to all its employees during the previous year
2008-2009:
(i) Gifts of Rs 10,00,000 distributed among employees on Deepawali.
(ii) Contribution to Approved Superannuation Fund for 25 employees, @ Rs.1,60,000 p.a.,
amount Rs 40,00,000.
(iii) Club facility to employees at the cost of Rs 10,00,000.
(iv) Merit scholarship provided to the children of employees, cost being Rs 5,00,000.
(v) Entertainment expenditure for employees Rs 6,00,000. This includes Rs 2,00,000 on free
meals during office hours.
(vi) Hospitality: Rs 10,00,000.
(vii) Medical allowance to all employees, equal to one month’s salary, cost being Rs 15,00,000.
(viii) Free telephone to employees at a cost of Rs 4,00,000.
(ix) Conveyance Rs 10,00,000.
(x) Tours and travels Rs 10,00,000.
(xi) Repairs, running and maintenance of motor cars, Rs 15,00,000.
(xii) Hotel, boarding and lodging facilities Rs 8,00,000.
Compute liability of FBT of KP Ltd. in the following cases:
(i) KP Ltd. is a Construction company
(ii) KP Ltd. is a Hotel company;
(iii) KP Ltd. is a Software company;
Solution: Computation of FBT liability for the AY 2009-2010
Hotel company Software Construction
company company
Particulars of expenditure Rate Value Rate Value Rate Value
Rs Rs Rs
(lakh) (lakh) (lakh)
(i) Gift [Sec. 115WB(2)(O) r.w. 50% 5.00 50% 5.00 50% 5.00
Sec. 115WC(1)(d)]
(ii) Contribution to Approved 100% 15.00 100% 15.00 100% 15.00
Superannuation Fund in excess of
Rs 1,00,000 for each employee per annum
[Sec. 115WB(1)(c) r.w. Sec. 115WC()(b)]
(iv) Club facility [Sec. 115WB(2)(N) r.w. 50% 5.00 50% 5.00 50% 5.00
Sec. 115WC(1)(d)]
(v) Merit scholarship [Sec. 115WB(2)(P) r.w. 50% 2.50 50% 2.50 50% 2.50
Sec. 115WC(1)(d)]
(vi) Entertainment [Sec. 115WB(2)(A) r.w. 20% .80 20% .80 20% .80
Sec. 115WC(1)(c)]: (6,00,000 - 2,00,000)
(vii) Hospitality [Sec. 115WB(2)(B) r.w. 5% .50 20% 2.00 20% 2,00
Sec. 115WC(1)(c)]
(vii) Medical allowance: Not liable to FBT – – – – – –
(vui) Free telephone [Sec. 115WB(2)(J) r.w. 20% .80 20% .80 20% .80
Sec. 115WC(1)(c)]
(ix) Conveyance [Sec. 115WB(2)(F)] 20% 2.00 5% .50 5% .50
Tax Supplement 7
(x) Tours and travels [Sec. 115WB(2)(Q) 5% .50 5% .50 5% .50
r.w. Sec. 115WC(1)(e)]
(xi) Repairs, running and maintenance of 20% 3.00 20% 3.00 20% 3.00
motor car [Sec. 115WB(2)(H) r.w.
Sec. 115WC(1)(c)]
(xiii) Hotel, bording and lodging facilities 20% 1.6 5% 0.40 20% 1.60
[Sec. 115WB(2)(G) r.w. Sec. 115WC(1)(c)]
Total value 36.7 35.50 36.70
FBT @ 33.99% of the total value of fringe 12,47,433 12,06,645 12,47,433
benefits and rounded off to the nearest 12,47,430 12,06,640 12,47,430
multiple of Rs 10 (Sec. 288B)
5. JP Ltd., a pharma company, furnishes the following information about the expenditure incurred
and projected to be incurred for the financial year 2008-2009 and seeks your assistance in
determining its estimated liability in respect of FBT for the assessment year 2009-2010:
Particulars Rs
1. Entertainment 15,00,000
2. Hospitality 10,00,000
3. Conference 4,00,000
4. Sales promotion including publicity 16,00,000
5. Employees welfare 12,00,000
6. Conveyance 6,00,000
7. Hotel boarding and lodging 2,00,000
8. Repair, running and maintenance of motor car 5,00,000
9. Guest house maintenance 4,00,000
10. Festival celeberations 2,00,000
11. Health dub 4,00,000
12. Gifts 5,00,000
13. Scholarship 6,00,000
14. Tours and travels including foreign travels 4,00,000
15. Employer’s contribution to recognised fund 10,00,000
16. Employer’s contribution to approved superannuation fund 15,00,000
17. Free tickets provided by the employer for private journeys of the 5,00,000
employees and their members of family
Total expenditure 1,25,00,000
Addition information:
(i) Entertainment expenditure includes:
(a) cost of TV, music system, refrigerator Rs 2,00,000 (b) reimbursement of personal
entertainment expenditure to employees Rs 1,00,000 (c) festival allowance to employees,
Rs 3,00,000 and (d) cost of amusement provided to clients/distributors, Rs 1,50,000.
(ii) Hospitality expenditure includes:
(a) food and beverages to employees in off ice/factory and outside office to sales personnel,
Rs 4,00,000 and Rs 1,50,000 (b) food and beverages brought from hotel for employees
working in late hours, Rs 50,000 and (c) payment for food through vouchers at eating
joints, Rs 1,00,000.
8 Tax Supplement
(iii) Conference expenses includes:
(a) participation fees in conference, Rs 40,000 (b) board meeting expense Rs 40,000 and
(c) conference of the dealers Rs 60,000.
(iv) Sales promotion includes:
(a) distribution of free samples to public, Rs 1,00,000 (b) distribution of free medical equipment
to medical practioners, Rs 2,00,000 (c) incentives given to distributors for meeting sales
targets, Rs 2,00,000 (d) payment to brand ambassadors Rs 2,00,000 (e) Ad-films Rs 1,50,000
and (f) Press conference Rs 1,00,000.
(v) Conveyance includes local conveyance provided to employees/customers, Rs 3,00,000 and
leave travel concession Rs 1,00,000.
(vi) Employer’s contribution to approved superannuation fund for managing director is
Rs 1,50,000.
Solution: Computation of Taxable value of Fringe Benefits for the AY 2009-2010
Particulars of expenditure Value of Rate of Taxable
fringe valuation Value
benefit [Sec.
[Sec. 115WC]
115WB]
Rs Rs Rs
1. Entertainment [Sec. 115WB(2)(A): Excluding cost 9,00,000 20% 1,80,000
of TV/fridge etc., reimbursement of personal
entertainment expenses of employees and
festival allowance
2. Hospitality [Sec. 115WB(2)(B)]: Excluding food 5,00,000 20% 1,00,000
and beverages in office and provided at eating
joints through paid vouchers.
3. Conference [Sec. 115WB(2)(e)]: Excluding 3,20,000 20% 64,000
participation fees and board meetings
4. Sales promotion and publicity [Sec.115WB(2)(D)]: 7,50,000 20% 1,50,000
Excluding distribution of medical equipment to
doctors, incentive to distributors, payment to
brand ambassadors, ad-films and press
conference.
5. Employees welfare [Sec. 115WB(2)(E)] 12,00,000 20% 2,40,000
6. Conveyance [Sec. 115WB(2)(F)]: Excluding local 2,00,000 20% 40,000
conveyance and LTC exempt under Sec. 10(5):
7. Hotel boarding and lodging [Sec. 115WB(2)(G)] 2,00,000 20% 40,000
8. Repair, running and maintenance of motor car 5,00,000 20% 1,00,000
9. Guest house maintenance [Sec. 115WB(2)(K)] 4,00,000 20% 80,000
10. Festival celeberations [Sec. 115WB(2)(L)] 2,00,000 50% 1,00,000
11. Health club [Sec. 115WB(2)(M)J 4,00,000 50% 2,00,000
12. Gifts [Sec. 115WB(2)(O)] 5,00,000 50% 2,50,000
13. Scholarship [Sec. 115WB(2)(P)] 6,00,000 50% 3,00,000
14. Tours and travel [Sec. 115WB(2)(Q)] 4,00,000 50% 20,000
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Tax Supplement 9
15. Employer’s contribution to recognised fund 10,00,000 Exempt –
16. Employer’s contribution to approved super- 50,000 100% 50,000
annuation fund [Sec. 115WB(l)(c) r.w.
Sec. 115WC(l)(b)]
17. Free tickets to employees for private journey 5,00,000 100% 5,00,000
[Sec. 115WB(l)(b) r.w. Sec. 115WC(l)(a)]
Fringe benefit tax liability @ 33.99% and 86,20,000 8,20,519 8,20,520
rounded off (Sec. 288B)
6. Following information is extracted from the books of Parthiv Ltd. Determine the taxable value of
Fringe Benefits and ascertain the FBT Liability.
Expenses Rs.
Lease Rent Paid 12,50,000
Vehicle Maintenance 8,00,000
Depreciation on: Motor Cars 3,00,000
Office Furniture 1,50,000
Guest House Building 2,00,000
Gifts 2,50,000
Tea, Coffee & Snacks 1,80,000
Communication Charges 4,00,000
Amenities to Employees 4,50,000
Education Assistance to Employees 50,000
Other Information -
(a) Lease Rent include Rs.2,50,000 paid towards accommodation furnished to Managing Director,
value of which is included as perquisite in his hands. Balance is attributable to Guest House
of the Company used for accommodating visiting clients and other officials of the Company.
(b) Expenses on Tea, Coffee and Snacks includes Rs.50,000 spent on Employees Training
Programme conducted by the Company itself.
(c) Gifts includes Rs. 1,75,000 paid to the Sales Executives for achieving the target.
(d) Communication Charges comprises of Rs.2,50,000 towards Telephone Charges and balance
towards leased internet connection.
Determine value of Fringe Benefits and tax payable thereon.
Solution: Assessee: Parthiv Ltd
Previous Year: 2008-09
Asst. Year: 2009-10
10 Tax Supplement
Computation of Taxable Fringe Benefits and Tax Payable thereon
Nature of Fringe Benefits Expenditure % considered Value of FB
Incurred for FBT
Lease Rent Paid : 2,50,000 — —
For MD’s Accommodation-Considered as Perquisite 10,00,000 20% 2,00,000
For Guest House (12,50,000 - 2,50,000) 8,00,000 20% 1,60,000
Vehicle Maintenance 3,00,000 20% 60,000
Depreciation on Motor Cars 1,50,000 — —
Depreciation on Office Furniture 2,00,000 — —
Depreciation on Guest House Building 2,50,000 50% 1.25.000
Gifts Tea, Coffee & Snacks: During Office Hours 1,30,000 — —
Employees Training 50,000 — –
Programme
Communication Charges:
Telephone Charges 2,50,000 20% 50,000
Internet Connectivity Charges 1,50,000 — —
Amenities to Employees 4,50,000 100% 4,50,000
Education Assistance to Employees 50,000 50% 25,000
Total Value of Taxable Fringe Benefits 10,70,000
Tax on above at 30% 3,21,000
Add: Surcharge at 10% 32,100
(assuming Total Income exceeds Rs.1 Crore)
Tax and Surcharge Payable 3,53,100
Add: Education Cess @ 2% 7,062
Add: Secondary and Higher Education Cess @1% 3,531
Total Tax Payable (Rounded off) 3,63,690
7. Simran Pharma Ltd. manufacturer of drugs and pharma products provides the following
information relating to payments made to its marketing manager in the year 2008-09:
(a) Salary at Rs.20,000 p.m.
(b) Motor Cycle purchased for Rs.45,000 in June, 2007 was given free of cost.
(c) Conveyance allowance of Rs.5,000 p.m. which was allowed to him as exempt u/s 10(14).
(d) Tickets worth Rs.4,000 for a cricket match between India and England.
(e) Reimbursement of medical expenses incurred actually by him of Rs.17,500. The Company
asks you to compute the amount of -
Payments covered under Fringe Benefits, amount chargeable to FBT and the amount of such tax
thereon.
Solution:
Assessee: Individual
Previous Year: 2008-09 Assessment Year: 2009-10
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Tax Supplement 11
Assessee: Simran Pharma Ltd. Previous Year: 2008-09 Assessment Year: 2009-10
Computation of Fringe Benefits Tax
Nature of benefit Taxable value u/s 115WC Rs.
Tickets to Cricket Match - Being Gift [WN 2] Rs.4,000 x 50% 2,000
Reimbursement of Medical Expenses - Being Rs. 15,000x20% 3,000
Staff Welfare Expenses [WN 3]
Total Value of benefits liable to FBT 5,000
Tax on Fringe Benefits @ 30% 1,500
Add: Surcharge @ 10% 150
Add: Education Cess @ 2% 33
Add: Secondary and Higher Education Cess @ 1% 16
Total FBT payable (Rounded Off) 1700
Note: It is assumed that the Total income of the Company exceeds Rs.1Crore.
Working Notes:
1. Valuation of perquisite arising from the transfer of Motor cycle under Rule 3(7)(viii)
Particulars Rs.
Actual cost 45,000
Less: Depreciation @ 10% for every completed year under SLM NIL
Value of the asset 45,000
Less: Amount recovered from the Employee NIL
Value of Perquisite 45,000
2. Gifts in kind are not taxable perquisites but are liable to FBI in the hands of the Employer.
Therefore, tickets worth Rs.4,000 are not a taxable perquisites in the hands of the employee
but are subject to FBI u/s 115WB(2)(0).
3. Benefits which are taxable in the hands of the employees as perquisites are not liable for
FBI. Since medical reimbursements exceeding Rs. 15,000 is a taxable perquisite in the
Employee’s hands, the same is not subject to FBI in the hands of the Employer. Hence only
Rs. 15,000 is subject to FBI u/s 115WB(2)(E).
4. Allowances exempted u/s 10(14) are not subject to FBI [Circular No.8/ 2006 dt
29.08.2006]. Hence the conveyance allowance exempt u/s 10(14) is not subject to FBI.
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