Good news! FBT is all set to be diluted

NEW DELHI: India, Inc. can breathe easy now, with the government all set to dilute the provisions of the (FBT). The finance ministry has decided to exclude any expenditure on advertisement from the purview of FBT. Use of telephone (including mobile phone) is set to attract a 20% FBT. However, expenditure on leased lines will be exempt. The Budget had proposed a 30% FBT to be paid by the employer. Individuals and HUFs engaged in a business or profession are set to be exempt from FBT. Charitable trusts, too, will be out of the FBT purview. Reprieve is set to be given to hotel, pharma and computer software. The base for of FBT will be lower for certain categories of expenses in these sectors. This will reduce the tax burden on the employer. Trusts, fund, institutions that are eligible for income-tax exemption under clause 23(C) of Section 10 or registered under Section 12AA of the I-T Act are also set to be exempt. This would come as a major reprieve for charitable institutions who already enjoy an income-tax exemption. Contributions to approved super-annuation funds are set to attract FBT, with the government likely to retain the Budget proposal. The categories of expenses on which FBT would be levied include entertainment (20%), provision of hospitality of every kind by the employer (excluding expenses on payment for food or beverages provided in office, or payment through vouchers that are not transferable). Conference (other than fee for participation by employees) will attract FBT. Any expenditure on tour and travel, including foreign travel, on hotel, board and lodging in connection with the conference will be deemed to be the expenditure incurred for the conference. Expenditure on repair and running of (including fuel and maintenance) motor cars is set to include the amount of depreciation as well. A major relief is set to be given under sales promotion and publicity. Any expenditure on advertisement is set to be exempt. Expenses on sponsorships of sports events or any other event organised by a government agency or a trade association will also be exempt from FBT. In case an employer is engaged in the business of a hotel, the value of fringe benefit for conveyance, travel and tour will be 5% instead of 20%. For the pharma sector, the value of fringe benefits on conveyance and use of hotels will be 5% instead of 20%.

Good news! FBT is all set to be diluted

Expenses on sponsorships of events organised by government will be exempt from fringe benefit tax.

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