Fringe Benefit Tax (FBT)

As per AY 2009-10

Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees to be abolished.

As per AY 2008-09

Crèche facilities, sponsorship of an employee-sportsperson, organising sports events for employees, and guest houses excluded from the purview of FBT.

For the Assessment Year 2007-08

The following amendments will be in effect from 1 April 2008: In respect of any allotment or transfer of any specified securities or sweat equity shares, either directly or indirectly, by the employer to its employees (including former), FBT will be levied. On the difference between FMV of securities FBT will be payable, for both on the date of exercise and the amount recovered from the employee. The FBT will be computed according to the prescribed method of CBDT. The benefits which are subject to FBT will henceforth be considered as cost of acquisition for coputing of capital gains tax in the hands of the employee at the time of sale of specified securities. Section 17(2)(iii) for the beneficial proviso for computing the perquisite value in the hands of the employees is deleted. The undermentioned expenses will be excluded from Sales Promotion & Publicity: Expenses on display of products. Expenses on distribution of samples, either free of cost or at a concessional rate. The following amendments is in effect from 1 April 2007: Equal proportion and due dates for the payment of advance tax on income will be applicable to advance FBT. Consequential change will be made in the process of computing interest for delay in the payment of advance FBT

As per Assessment Year 2006-07
Fringe benefit tax retained at 30%

According to P. Chidambaram's announcement in the Lok Sabha, a FBT of 30% will be levied on 20% of the fringe benefit expense. In simpler terms, FBT will work out to be 6% of the total amount.

But in end, the effective FBT turned out to be just 2% for regular companies and 0.5% for special-category companies like IT and pharmaceuticals. What's more, India Inc can avoid paying even this minuscule amount of tax if their auditors certify an expense as a genuine business expenditure.

According to industry sources, there will be 1.5 to 2% additional tax burden to companies due to items covered under FBT account for about 10-15% of total corporate profits.

Taxable or Exempted items under Fringe Benefit Tax (FBT)

Taxable	Exempted
Use of telephones, including mobile phones, the base for valuation will be 20%	Expenses on advertising
The base for valuation of FBT will be 20% for expenses on entertainment, hospitality, sales promotion and publicity, employee welfare, conveyance, tour and travel (including foreign travel) and use of hotels.	Expenses on leased lines will.
50% for expenses on festival celebrations, use of clubs, scholarships and so on.	Charitable institutions, trusts and funds.
For superannuation funds, FBT will be levied on the entire contribution made by the employer for employees.	Individuals and Hindu Undivided Families (HUFs) engaged in a business or profession.
Tax on foreign tour and travel. Infosys, for instance, spend about 4% of its revenues on foreign travel. Phone bills account for close to 1%, another expense attracting the fringe benefit tax.	Conference expenses, only the fee for participation
Repairs and maintenance of cars have also been brought under the purview of fringe benefit tax now. The only saving grace is that only 5% of maintenance costs for transport companies will now be subject to FBT.	Employee welfare expense, only the expenses incurred to fulfil any statutory obligation or to mitigate hazards or to provide first aid facility that too only in a hospital or dispensary run by the employer.
Any privilege, service or amenity provided directly or indirectly by an employer by way of reimbursement or otherwise to employees will attract FBT, which is to be paid by employers.	Guest houses for training.
Fifty per cent of expenses on club facilities.	Expenses incurred due to sales promotions
Expenses borne by companies on foreign travel of their employees will be under the purview of FBT. FBT on travel expenses has been cut to 5%.	Medical expenses.
Any free or concessional ticket provided by the employer for private journeys of employees or their family members and any contribution to an approved superannuation fund for employees will come under the purview of FBT.	Companies that are loss making.
Expenditure on employees welfare will attract FBT, but not the expenditure incurred or payment made to fulfil any statutory obligation or mitigate occupational hazard or provide first aid facilities in hospital or dispensary run by employers.
Other expenditures that will come under FBT are conveyance, tour and travel including foreign travel, use of hotel, boarding and lodging facilities, repair, running, maintenance of motor cars and aircraft and the amount depreciation on them.
Maintenance of any accommodation like guest house except those used for training purposes, festival celebrations, use of health club and similar facilities, use of any other club facilities, gifts and scholarships will come under FBT.

% of expense under the fringe benefit tax

	Earlier	Now
Use of telephone (other than leased lines)	10%	20%
Entertainment	50%	20%
Scholarship to children of employees	Actual	50%
Hospitality	50%	20%
Maintenance of accommodation like guest houses	50%	20%
Conference	50%	20%
Employee welfare	50%	20%
Sales promotion, including publicity	50%	20%
Festival celebration	50%	50%
Gifts	50%	50%
Use of club facilities	50%	50%
Use of health clubs, sports and similar facilities	50%	50%
Conveyance, tour and travel, including foreign travel	20%	20%
Hotel, boarding and lodging	20%	20%
Repair, running (including fuel), maintenance of motorcars and depreciation thereon	20%	20%
Repair, running (including fuel), maintenance of aircraft and depreciation thereon	20%	20%

Tax of 30% will be levied on the value of the fringe benefit calculated at the above rates