The Hindu Business Line : FAQs on Fringe Benefit Tax

Section 115WA provides that the rate of tax on the value of fringe benefits will be 30 per cent. Section 2(9) of the Finance Act also provides that such rate is to be increased by a surcharge. Additional surcharge (Education Cess) will also apply to such rate.

Query

Will an expenditure incurred by an employer on conveyance, tour and travel, boarding and lodging expenses of an employee solely related to the business of the employer also be treated as a fringe benefit?

Prashant Kamat

Reply

Even where such expenditure is incurred wholly for the business of the employer such expenditure will be treated as a fringe benefit.

It may be noted that Section 115WB(2) deems that expenses incurred and falling within the classifications listed in the sub-section result in a fringe benefit to employees.

Query

Will proprietary concerns be liable for FBT? Where a company takes cars on rent, will FBT be attracted?

Will FBT be attracted in respect of landline telephones or mobile phones used only in the office of the employer? In case of expenses by way of sales promotion, will it be taxable as a fringe benefit even if the expenditure is incurred on persons not being employees?

Will travel expenses incurred on persons not being employees of a company be subjected to FBT?

Bharat Agarwalla

Reply

Proprietary concerns are not assessed in a separate status. They are assessed as an individual.

Since an individual is not subjected to FBT as they are not defined as an employer within the meaning of Section 115W, no FBT will be payable by proprietary concerns.

In respect of expenses on a car, FBT will be attracted on the running and maintenance expenses and on the depreciation on the car.

A view could be taken that the rent of the car when a car is taken on hire, is not part of the running and maintenance expenses and that therefore no FBT will be payable on the rent. This of course will be a gray area and not one beyond doubt.

Expenses incurred on telephones installed in office and mobile phones will also be subject to FBT, since it cannot be said that the employee did not derive any benefit out of the same.

If, however, the telephone or mobile phone is provided to a person other than an employee, FBT will not be applicable on the expenses on such phones.

Only expenses incurred wholly or partly for the benefit of the employees whether by way of sales promotion or by way of travel will attract FBT.

If the expense is wholly related to non-employees, no FBT will be payable in respect of such expenses.

This being the case, expenses incurred by the management on sales promotion, which is not related to employees, and travel expenses, which are not related to employees, will not be treated as a fringe benefit.

(To be continued)

Mail your queries to taxtalk@thehindu.co.in or by post to Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.