FBT

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CA Dhaval Karia (Querist)
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26 February 2009 The Marketing People will go to different states by using their own Car. so under which head we will take that Exps?

FBT Rate on it will Be 5 or 20 percent?

If we will make contract with them about their use of the car & can take it in to 5% FBT?

chetan soni

chetan soni (Expert)
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26 February 2009 It will classified as Travelling Expenses Reimbursement. It will taxable as 20%. If you make any contract then also you need to pay FBT @20%

CA Dhaval Karia

CA Dhaval Karia (Querist)
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27 February 2009 Thanx for the reply but i have a query that we are taking the Car Hire Exps. under the Tour & Travels Exps. @ 5% FBT.

So, Can we divide this Travelling Expense Reimbursement in to 2 parts as Follows:

1) only car Exps: on the basis of the petrol refilled OR on the basis fo the Km's run by the car, the marketing people will provide the proof of both the above, which we will take in Tours & Travels Exps. @ 5% FBT, and

2) Remeining Exps. we will take it as Travelling Exps. @ 20% FBT.

so, can we do the above procedure?

Thanx in advance.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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24 July 2024 FBT (Fringe Benefit Tax) was a tax regime in India that was abolished in 2009. However, based on your query regarding expenses related to employees using their own cars for business purposes and the classification under FBT rates (5% or 20%), here's a clarification:

1. **Classification of Expenses:**
- If employees are using their own cars for business purposes, the expenses incurred can be categorized under "Travelling Expenses" for taxation purposes.

2. **Rate of FBT:**
- Since FBT is no longer applicable, you would now consider the tax treatment under the current Income Tax rules for employee reimbursements and allowances.

3. **Expense Allocation:**
- It's common practice to segregate expenses related to car usage (fuel, maintenance) from other travel expenses (accommodation, meals). This segregation helps in applying the appropriate tax treatment under the Income Tax Act.

4. **Proof of Expenses:**
- For car expenses (petrol or mileage), you can use receipts of petrol refills or maintain a log of kilometers driven for business purposes as proof. These can support your claim under "Travelling Expenses."

5. **Tax Implications:**
- Under current Income Tax rules, reimbursements for business-related travel expenses are generally treated as exempt from tax up to certain limits or as per actuals, provided proper documentation and proofs are maintained.

6. **Contractual Agreements:**
- Contractual agreements with employees regarding car usage can define how expenses are reimbursed or accounted for. This can help in managing tax implications effectively.

In summary, while FBT is no longer applicable, you should follow the current Income Tax guidelines for the treatment of employee travel expenses. Segregating car expenses from other travel expenses based on receipts or mileage logs is acceptable, and proper documentation is crucial to support tax claims. If you have specific questions about how to categorize or treat these expenses under current tax laws, it's advisable to consult with a tax advisor or accountant familiar with Indian tax regulations.