26 April 2009
Broadband connection is also treated on par with telephone expenses and therefore FBT is attracted automatically. Section 115wb(2) (j) gives the exemptions.
By means of Internet public at large can access such a vast amount of information / knowledge. Yes it can be treated as a chatting tool; but these are the developments of technology. Further it may not be necessary that one should have a telephone connection.
Please give a fresh thought to the subject whether Internet Expenses can be covered within the meaning of Telephone Expenses.
01 August 2024
Fringe Benefit Tax (FBT) was a tax levied on certain fringe benefits provided by an employer to employees, but it was abolished from the Assessment Year 2010-11 onwards. Instead, the costs associated with such benefits are now considered under the general provisions of income tax laws.
However, to address your query about whether internet expenses for a broadband connection used in office premises are considered as fringe benefits under the older FBT regime or if they can be categorized under telephone expenses:
### **Fringe Benefit Tax and Internet Expenses**
1. **Fringe Benefit Tax (FBT):** - **Historical Context**: FBT was introduced in the Finance Act, 2005, and it was applicable to various fringe benefits provided by employers to employees. It was abolished with effect from April 1, 2009, (Assessment Year 2010-11). - **Applicability**: During the period FBT was applicable, internet expenses could be considered fringe benefits if they were provided by the employer to employees for personal use.
2. **CBDT Clarification:** - **CBDT Circular**: The CBDT issued Circular No. 8/2005 on July 29, 2005, which provided clarifications on the applicability of FBT to various expenses. This circular mentioned that telephone expenses incurred by an employer for the purpose of business, including the installation of telephones and broadband connections, could be treated as a fringe benefit if they are used for personal purposes as well. - **Reference to Circular**: According to the Circular, the cost of telephone and internet facilities provided to employees was subject to FBT if these facilities were used for personal purposes. The Circular clarified that the expense related to business use was not subject to FBT.
3. **Internet Expenses Post-FBT:** - **Current Tax Treatment**: After the abolition of FBT, internet expenses are treated as part of the general expenses of the business. They are deductible as a business expense under Section 37 of the Income Tax Act, 1961, provided they are used for business purposes. - **Personal Use**: If the internet is used for personal purposes, it is treated as part of the employee's taxable income. However, this would be subject to personal income tax rules rather than FBT.
4. **Categorization of Internet Expenses:** - **Telephone Expenses**: The term "telephone expenses" in the context of FBT and general tax provisions usually refers to costs incurred for telecommunication services, including telephone and broadband. Internet expenses incurred for business purposes can be categorized under general office expenses and are not necessarily limited to telephone expenses. - **Broadband Connections**: Internet expenses for broadband connections used in office premises are typically considered part of office utilities and are deductible as business expenses, provided they are used primarily for business purposes.
### **Conclusion:**
- **Historical FBT**: During the period when FBT was applicable, internet expenses for personal use were subject to FBT based on the CBDT Circular No. 8/2005. - **Current Scenario**: Post-FBT, internet expenses are treated as business expenses under Section 37 of the Income Tax Act, 1961. They are not categorized under FBT but must be reasonable and used for business purposes. Personal use of internet expenses does not attract FBT but may have implications under personal income tax laws.
For current regulations and detailed guidance, it is advisable to consult the latest income tax provisions and professional tax advisors.
CAclubindia
