INCOME UNDER THE HEAD SALARY AND FRINGE BENEFIT TAX

1. INCOME UNDER THE HEAD SALARY AND FRINGE BENEFIT TAX

2. CONTENTS • Employer Employee Relationship • Basis of Charge under Section 15 of the Income Tax Act (the Act) • Definition of Salary under Section 17(1) of the Act • Allowances • Perquisites as defined under Section 17(2) of the Act • Valuation of Perquisites under Rule 3 of Income Tax Rules • Fringe Benefit Tax under Chapter – XII - H

3. EMPLOYER EMPLOYEE RELATIONSHIP Any income can be taxed under the head Salary only if there is employer and employee relationship. Basis of Charge (Section – 15) Due or Paid – whichever is earlier Arrear of Salary – tax in the year when paid if not taxed in the past Section 145(Method of Accounting) does not apply to Salary Income

4. MEANING OF SALARY (SECTION – 17(1))

5. SHAILENDER KUMAR Vs UOI • Section – 17 gives inclusive definition • Scope of inclusive definition can be extended to many other things which are not mention in it like allowances etc.

6. ALLOWANCES • Allowances are the sum provided to employees to meet expenses whether personal or official. • Allowances are taxable unless specific exemption has been provided for such allowance. • Exemption provided for the following: • HRA – Section 10(13A) read with Rule 2A • Specific or notified special Allowances – Section 10(14) read with Rule 2BB • Entertainment Allowance to be included in the Salary first and then deduction to be given as provided in Section 16(ii)

7. Meaning Benefits in addition to Salary to which employee has right by virtue of his employment PERQUISITES (Section – 17(2)) • Perquisites include: • Value of Rent Free Accommodation provided to employee • Accommodation provided at concession rent provided to employee • Value of any benefit or amenity granted or provided free of cost or at concessional rate to Specified Employee as defined under Section 17(2)(iii) • Any sum paid by employer in respect of any obligation which would have been payable by employee • Any sum payable by employer to effect an assurance on the life of assessee or to effect a contract for an annuity

8. PERQUISITES (Section – 17(2)) • Value of any other fringe benefit or amenity as may be prescribed (excluding fringe benefits chargeable to tax provided in chapter XII – H) • Nothing contain above shall apply to: • Use of Vehicle provided by employer for journey from residence to place of work or from place of work to residence • Expenditure on Medical treatment subject to conditions as mentioned in Provisio to Section 17(2)(ii)

9. VALUATION OF PERQUISITS – RULE 3 • Rule –3 determine the value of following perks: • Value of free/ concessional rent accommodation provided by employer to employee • Sweeper, gardner, watchmen or personal attendent provided to employee • Supply of gas, electric energy or water • Free or concessional education facility provided to member of household • Interest free or concessional loan • Use of movable assets belonging to employer, by employee • Transfer of any movable assets belonging to employer, by employee

10. VALUATION OF PERQUISITS – RULE 3 • Following Perquisites are omitted because of introduction of Fringe Benefit Tax under Chapter XII – H • Provision of Car and Chauffer • Concessional travel • Provision for holiday home facility • Provision for free/ concessional meal • Gifts • Credit card facility • Club facility • Telephone facility • Any other benefit provided by the employer

11. Rationale behind Fringe Benefit Tax (FBT) • Directly attributable benefits are taxable as perk in the hand of employee • Collective enjoyment of benefits which may involve a personal benefit, are taxable in the hand of employer FRINGE BENEFIT TAX UNDER CHAPTER XII - H Meaning of Fringe Benefit (FB) Side benefits that accompany or are in addition to a person’s regular compensation • Amendment in Section 17(2)(vi) to exclude fringe benefits provided in chapter XII – H • There will be no change in the tax treatment of elements chargeable under Salary except Perquisites • Perquisites provided under Rule - 3 may be taken as exempt in the hands of Employer

12. Definitions (Section – 115W) (a) “Employer” includes – • a company; • a firm; • An AOP/ BOI, excluding fund/ trust/ institution(s) eligible for exemption under Section 10(23C) or registered under Section 12AA • A local authority and • every artificial judicial person ( b) “Fringe benefit tax” or “tax” means the tax chargeable under section 115WA.

13. Charge of FBT (Section – 115WA) 1. A fringe benefit tax be charged in respect of the fringe benefits • provided or • deemed to have been provided by an employer to his employees • At the rate of thirty per cent on value of such fringe benefits. 2. The tax on fringe benefits shall be payable even if no tax is payable by employer under the Act. Fringe Benefits have been divided into two parts 1. Fringe Benefits – defined under section 115WB(1) 2. Deemed Fringe Benefits (Presumptive nature of FBT i.e. there need not be any benefit to employee except in case of employees welfare ) – defined under section 115WB(2)

14. Fringe Benefit - Section – 115WB(1) FRINGE BENEFIT – Meaning & Valuation

15. FRINGE BENEFIT – Meaning & Valuation Deemed Fringe Benefit - Section – 115WB(2)

16. FRINGE BENEFIT – Meaning & Valuation

17. FRINGE BENEFIT – Meaning & Valuation Deemed Fringe Benefit - Section – 115WB(2)

18. FRINGE BENEFIT – Meaning & Valuation

19. FRINGE BENEFIT – Meaning & Valuation SECTION – 115WB(3) For the purpose of Section – 115WB(1), any privilege, service, facility or amenity does not include perquisites in respect of which tax is paid or payable by the employee or any benefit or amenity in the nature of free or subsidies transport or any other allowance provided by Employer to his Employees on to or from journey from residence to office of the Employees.

20. ADVANCE TAX – SECTION 115WJ Same proportion, same due dates and same method of computing interest for delay in payment of advance tax on Income - will apply to advance FBT. Interest @ 1% per month or part of the month, is to be paid for short fall in tax for the period for which the short fall continues PROCEEDURE FOR FILING RETURN – SECTION 115WD - For Companies and other entities whose accounts are to be audited – 31st October - For others - 31 July • One Month from the date of issue of notice where AO issues notice to a defaulting employer. • A defaulting employer may file return up to one year from the end of relevant assessment year or before the completion of assessment whichever is earlier. • A revise return can be filed up to one year from the end of assessment year

21. Assessment (Section – 115WE) • Best Judgment Assessment (Section – 115WF) • Fringe Benefit Escaping Assessment (Section – 115WG) • Issue of notice where Fringe Benefits have escaped assessment (Section – 115WH) • Payment of Fringe Benefit Tax (Section – 115WI) • Advance Tax in respect of Fringe Benefits (Section – 115WJ) • Interest for default in furnishing return (Section – 115WK) • Application of other provisions of this Act (Section – 115WL) OTHER PROCEEDURAL REQUIREMENTS

22. THANK YOU