FBT
This query is : Resolved
11 September 2009
If a company recovers telephone and conveyance from clients and credit to respective accounts, the result is for some quarters it is in negative. How company should calculate and pay FBT?
11 September 2009
FBT is to be payable on the expenditure incurred and hence for the whole amount FBT need to be payable.
27 September 2009
No......no fbt would be payable........it should be paid only on Net amount
29 September 2009
But if i incure expenditure on behalf of client, then i will only pay fbt on it, isnt it? how client will pay fbt on it. it is my expenditure so i should pay fbt on the amounts which i have debited. Please clarify
24 July 2024
It seems there is some confusion regarding how Fringe Benefit Tax (FBT) used to work and how it applies to expenses incurred by a company on behalf of clients or recovered from clients. However, it's important to note that FBT was abolished in India effective from 1st April 2009, and it is no longer applicable.
Nevertheless, to address your questions based on historical practices and for clarity under current tax considerations:
1. **FBT on Recovered Expenses:**
- Under the previous FBT regime, if a company recovered expenses such as telephone and conveyance from clients and credited these amounts to respective accounts, it would typically calculate FBT on the total value of these recovered expenses. FBT rates varied depending on the nature of the expense, such as 5% for certain expenses and 20% for others.
- The company would pay FBT on these recovered amounts based on the rates applicable at that time.
2. **Expenditure Incurred on Behalf of Clients:**
- If the company incurs expenses on behalf of clients, the treatment under FBT would involve assessing whether these expenses are considered fringe benefits provided to employees (including directors) or associates.
- If the expenditure is deemed to be a fringe benefit, the company would be liable to pay FBT on these expenses.
- Clients typically would not directly pay FBT on these expenses because they are not the ones providing the benefit (in this case, the company is providing the benefit by incurring the expense).
3. **Clarification on FBT Liability:**
- FBT liability was on the employer (company) who provided fringe benefits to employees, directors, or associates. It was not typically a tax that clients would pay directly.
- The calculation and payment of FBT were based on the value of fringe benefits provided or expenses recovered from employees or clients and the applicable rates under FBT rules.
Since FBT is no longer applicable, these historical practices are informative but not directly relevant for current tax compliance. Instead, under current Income Tax rules, expenses incurred and recovered from clients may have implications for deductibility and tax treatment under business expenditure rules. It's advisable to consult with a qualified tax advisor or accountant to ensure proper compliance with current tax laws and regulations regarding business expenses and reimbursements.
Nevertheless, to address your questions based on historical practices and for clarity under current tax considerations:
1. **FBT on Recovered Expenses:**
- Under the previous FBT regime, if a company recovered expenses such as telephone and conveyance from clients and credited these amounts to respective accounts, it would typically calculate FBT on the total value of these recovered expenses. FBT rates varied depending on the nature of the expense, such as 5% for certain expenses and 20% for others.
- The company would pay FBT on these recovered amounts based on the rates applicable at that time.
2. **Expenditure Incurred on Behalf of Clients:**
- If the company incurs expenses on behalf of clients, the treatment under FBT would involve assessing whether these expenses are considered fringe benefits provided to employees (including directors) or associates.
- If the expenditure is deemed to be a fringe benefit, the company would be liable to pay FBT on these expenses.
- Clients typically would not directly pay FBT on these expenses because they are not the ones providing the benefit (in this case, the company is providing the benefit by incurring the expense).
3. **Clarification on FBT Liability:**
- FBT liability was on the employer (company) who provided fringe benefits to employees, directors, or associates. It was not typically a tax that clients would pay directly.
- The calculation and payment of FBT were based on the value of fringe benefits provided or expenses recovered from employees or clients and the applicable rates under FBT rules.
Since FBT is no longer applicable, these historical practices are informative but not directly relevant for current tax compliance. Instead, under current Income Tax rules, expenses incurred and recovered from clients may have implications for deductibility and tax treatment under business expenditure rules. It's advisable to consult with a qualified tax advisor or accountant to ensure proper compliance with current tax laws and regulations regarding business expenses and reimbursements.
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