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Accounting Treatment of expenses charged with FBT

Richa (CA) (63 Points)

28 January 2008

Hi All

Please clarify if the expenses reimbursed to employees on which FBT is paid should be shown as salary cost or as operating cost under respective heads in Financial Statements. For E.g: FBT is charged on depreciation of car provided to employee and shown in total deprn on FA. On similar lines can i show the Elec. chgs, Medical, Travelling, etc reimbursed to employees as the operating exp of the company.

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11 Replies

CA. Dashrath Maheshwari (TaXpert) (15103 Points)
Replied 28 January 2008

For the purposes of computation of total income under the Income tax Act, FBT is not an allowable deduction under sub -clause (ic) of clause (a) of section 40 of the Income-tax Act. However, the accounting treatment of FBT for the purposes of reporting to shareholders and complying with the obligations under the Companies Act will be governed by the Accounting Standards issued by the Institute of Chartered Accountants of India

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CA. Dashrath Maheshwari (TaXpert) (15103 Points)
Replied 28 January 2008

Please look in the database, a file uploaded today by me abt complete a/cing treatment (Guidance note)

CA. Dashrath Maheshwari (TaXpert) (15103 Points)
Replied 28 January 2008

Please look in the database, a file uploaded today by me abt complete a/cing treatment (Guidance note)

PRAKASH AGARWAL (SERVICE) (46 Points)
Replied 28 January 2008

It is shown under respective operating expenses account head. Only for the purpose of calculating FBT they are being cosidered as benefit to employees. FBT amount is being shown below the line under tax payment head.

Prashant (auditor) (23 Points)
Replied 13 February 2008

HI All, pls tell me the provision of FBT on salas promotion? Will Any gift or payment made to customers attract FBT?what is the rate, is it 20% or 50%?

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ravi sankar (Chartered Accountant) (157 Points)
Replied 15 February 2008

Hai, Firstly for Salary cost: does the item of expenditure come under the salary components? one should ascertain. e.g if motor car exps are reimbursed to exmployees, then it forms part of salary component. But if the bussiness unit owns a vechilce and lends it to the employee for his private or bussiness purposes, then expenses on vechicle should be reported under operating expenses under the proper heads separately say (1) depreciation or (2) running expenses like fuel and repairs etc.

The treatment should be the simillar for any other expenditure linked to the employee.

The accounting treatment in books should be a altogether diffrent matter than the "calculation of FBT" These two are mutually exclusive concepts.

For the FBT, if one reads the lines clearly in the act, certain expenses by the bussiness will be "chargeble" under FBT just because they are expended, irrespective of the fact that the expenditure has link to employees or not. Hence motor car running expenses will be chargeable under FBT even if there is no employee in the bussiness unit.

For a "one-man army-like" bussiness, FBT is not chargeble mainly because of the "definition" of "company" for the purposes of FBT

kuldeep gupta (service) (20 Points)
Replied 09 May 2008

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(Guest)

Originally posted by :Richa
"	Hi All Please clarify if the expenses reimbursed to employees on which FBT is paid should be shown as salary cost or as operating cost under respective heads in Financial Statements. For E.g: FBT is charged on depreciation of car provided to employee and shown in total deprn on FA. On similar lines can i show the Elec. chgs, Medical, Travelling, etc reimbursed to employees as the operating exp of the company.	"

Shambhu (Employee) (0 Points)
Replied 16 October 2008

how can we pass account entry for EXCISE DUTY. and How it is to be finalise. what should I know about this.

(Guest)

My Auditor says that all the Travelling expenses that appears in P&L will attract FBT. Ours is a forthcoming entertainment media, whereas travelling expenses will be there very frequestly (inbound and outbound). But I doubt on our auditors views. Please someone clarity

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(Guest)

During Last financial year our company has only one salaried employee( the company incorporated in Feb'2008). Please clarify whether our company is attracted under FBT act during the financial year. 2007-2008. Any way we paid our FBT as per our auditors advice, as they have advised that we have to pay FBT for all the expenses like travelling and business promotion that we have spent during that period. I request someone suggestion on FBT calculation on Travel and Business promotion.