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FBT related

DEEPTI (Article Trainee) (50 Points)

19 November 2007

Dear friends !!

While watching a programme called TAX GURU in IBN 7 last week, i came across an aspect related to FBT which i would like to share with you.

Query : " Is the company required to pay FBT on the sum paid for the purpose of notice period compensation on behalf of a newly joined employee to his ex - employer ?

Reply : If the company does not pay FBT on such amount then the benefited employee will be liable to pay tax on the sum under the head of " Salaries "

Hense the expert suggests all the employees who take such bebefit to ensure that FBT is paid by the employer on the amount to avoid additional tax ??

Here my query is ,

If the company agrees to pay FBT then under which head of sec 115WB can she classify such amount and why ?

Kindly send me your opinions.

Regards
Deepti

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10 Replies

Sathish Karunakaran (ACA) (614 Points)
Replied 19 November 2007

I guess the notice period compensation will be covered U/s. 115BW (1) (a). In real it is liability of the employee and if paid by the new employer either by reimbursement or directly paid to the ex-employer, it is an additional amenity provided to the employee other than his CTC. The section 115WB (1) (a) runs as follows : "(a) any privilege, service, facility or amenity, directly or indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employee or employees);"

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K R Ramesh (Service) (201 Points)
Replied 19 November 2007

I believe notice pay should be treated as perquisite and taxable as part of salary Income. Consequently FBT wont be applicable on this. Whether it is paid as reimbursement or as Lumpsum is should be fully taxable

DEEPTI (Article Trainee) (50 Points)
Replied 19 November 2007

hi satish Thanks a lot , as per ur point , qualifying amount for such amount would b 100% and over that 33.99% of FBT tax. regards Deepti

SAMEER (CHARTERED ACCOUNTANT) (304 Points)
Replied 19 November 2007

i am agree with ramesh, before following sec 115 WB PLEASE READ CARE FULLY ALL THE CLAUSES OF OF SEC 17

CA Guru M (B.com, CA, CS) (1552 Points)
Replied 19 November 2007

Hi Deepthi,

I think Mr. Sameer CA & Mr.Ramesh both are right, becuase Any compensation received by the emploee, for any chage or modifications in the employment is taxable in the hands of Employee under the head salary. And there is no quesetion of FBT payable by the Employer..,

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CA vishal malik (Chartered Accountant) (42 Points)
Replied 20 November 2007

Dear Guru M, Its really good that our future Chartered accountant is auditing the view of our present CA(Mr.Sameer).BEST OF LUCK !! I appreciate this.