TIOL-DDT 190 · the untouched capture
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<html> <head> <title>Untitled Document</title> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> </head> <body bgcolor="#FFFFFF"> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><b><font color="#663399" size="3">TIOL-DDT 190</font><br> 30 08 2005<br> Tuesday</b></font></p> <p align="center"><font color="#006633" size="2" face="Verdana, Arial, Helvetica, sans-serif"><b>Don't distribute sweets to employees on deewali; Do it on Independence Day - That's FBT</b></font></p> <p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <strong>Independence Day is not festival, says CBDT:</strong> The CBDT has issued a detailed clarification answering over a hundred questions on various aspects of the Fringe Benefit Tax. Nothing is left on the Fringe - everything is taxable. <br> <br> <strong>But Why FBT at all?</strong> It is for equity - vertical and horizontal! Getting revenue may be only an incidental hazard, which burden the government is willing to take on its Atlas' like shoulders. Look at the good reasons for imposing FBT.<br> <br> 1. The taxation of perquisites or fringe benefits is justified both on grounds of equity and economic efficiency.<br> <br> 2. When fringe benefits are under-taxed, it violates both horizontal and vertical equity;<br> <br> 3. A taxpayer receiving his entire income in cash bears a higher tax burden in comparison to another taxpayer who receives his income partly in cash and partly in kind, thereby violating horizontal equity.<br> <br> 4. Further, fringe benefits are generally provided to senior executives in the organization. Therefore, under- taxation of fringe benefits also violates vertical equity.<br> <br> 5. It also discriminates between companies which can provide fringe benefits and those which cannot thereby adversely affecting market structure<br> <br> AND it was not an easy task for the government to tax the benefits to employees. So they had to sadly take the difficult route of FBT as a surrogate tax on employers. We are all expected be grateful to the government for this brilliant idea - never mind in the process, they now want to tax all expenditure even if some of them have no relation to employees. <br> <br> <strong>FBT not applicable to Law Firms:</strong> Lawyers will not be taxed, not because they make the laws, not even because the Finance Minister and his wife are lawyers (and certainly not because they guard secrets from each other about who their clients are, especially if the client happens to be the Income Tax department.) It is because lawyers are not employed - they are retained. <br> <br> <strong>If you are a blue chip company</strong> and you want to give some fringe benefits to your employees, don't give them clubs and paid holidays abroad; instead give them shares. Shares do fall under Fringe Benefits but in the absence of computation provisions, there is no tax on this.<br> <br> <strong>Pay your advocates and auditors well</strong> by way of conveyance, tour and travel and you don't need to pay FBT. Incidentally FBT is not on what you provide to the employees but on what you have deemed to have provided. Even foreign companies having employees in India are not exempted - Double Taxation Avoidance Agreements, not withstanding. If your company is in India and all your employees are abroad there is no FBT. <br> <br> If the expenditure is bogus, there is no FBT - after all FBT is only on actual expenditure and not on bogus ones. And how do you account for the FBT? There is no accounting procedures but ask the Institute of Chartered Accountants of India for the accounting standards. Airlines may not now like to give that free tickets to employees for they will be taxed on the price other passengers are going to pay for those tickets. <br> <br> If you have your own training centre, you need not pay FBT on the lunch you provide to your trainees between those sleeping sessions. But if your training centre is a hired one, ask your employees to carry their own lunch packets, failing which you will be taxed. If you have your own in-house training programme, please don't feed your employees, for they will not learn properly and you will have to pay a tax on the food. And don't be liberal in sanctioning those training trips to your employees in fancy organisations who charge a fortune for a few pegs of scotch and a few pages of unreadable material - you will have to pay tax on the expenditure. Instead ask him to stay at home and have those pegs and ignore those pages. <br> <br> Are you a medical company and very generous in distributing fridges and TVs to doctors for promoting your products? Don't give those useless doctors even sample medicines - they (medicines and fridges) will be taxed under FBT. Who gets the benefit?<br> <br> It is alright if you want the children of your employees to go to school, but don't subsidize such education. And don't give a school bus for their children - let them go by their own transport. But if you want your employees to be safe, do provide them with safety shoes - but only if statutorily required. Same applies to uniforms. If you want employees to be well read, ask them to buy their own books. But do have an ambulance around; you don't need to pay tax on that.<br> <br> If you have a car or an aircraft learn driving or flying and dismiss that stupid driver and pilot for they are liabilities entailing FBT. And if you have to pay rent for the garage of that car or hangar for that aircraft, you will have to pay tax. Better sell that car and aircraft.<br> <br> <strong>Hello!</strong> Disconnect that phone including the mobile for they are potential tax liabilities. If you are paying rent on a guest house, it is liable for FBT and all expenditure on your guest house is within the ambit of FBT. This includes salaries and food. But do furnish your guest house with a TV and a fridge without FBT as these are categorized as acquisition of capital assets. <br> <br> <strong>Be Nationalistic - change your festivals.</strong> Many employers organise celebrations for New Year, Christmas, Deewali etc for the employees and their families and food and gifts are given on these occasions. Ban all such celebrations and if you want to have these get togethers, have them on Independence Day or Republic Day - for CBDT thinks these are not festivals. Do you know the Government including CBDT gives festival advance to its employees to celebrate festivals? And Independence Day is a festival recognized for this advance! <strong>There is no clarification on sweets packets given to Income Tax officials on Deewali day.</strong><br> <br> <strong>When an employee gets married,</strong> give him all your blessings but no gift for gift is covered under FBT. And don't be liberal in giving scholarship to your employees or their relatives.<br> <br> <strong>Do pick up your employees from their homes and drop them back - there is no tax on that. </strong><br> <br> With all these being taxable, don't worry if you have paid a little extra tax - you can adjust it in the next quarter. <br> <br> <strong><a href="http://www.taxindiaonline.com/RC2/pdfnoti/pdfcbdt/pdf2005/it05cir08.pdf">CBDT CIRCULAR NO.8/2005 dated 29th August, 2005</a></strong><br> <br> With such stiff dose of taxation for the day,<br> <br> <font color="#FF6666"><b>DDT has nothing more for today <br> <br> Until tomorrow with more DDT <br> <br> Have a nice day. <br> </b></font><br> <b>Mail your comments to <a href="mailto:vijaywrite@taxindiaonline.com">vijaywrite@taxindiaonline.com</a></b></font></p> </body> </html>