Finance Act, 2005 has introduced a new
tax in the form of Fringe Benefit Tax (FBT). FBT is a tax payable by the
employer on benefits (provided/ deemed) that employees (past or present)
receive as a consideration of their employment. FBT is leviable on every
employer excluding individuals/ Hindu Undivided Family and certain
institutions enjoying certain exemptions.
Certain expenses are directly covered within the ambit of FBT. In respect
of expenditure such as entertainment expenditure, conferences, etc. certain
percentages of these expenses have been deemed as fringe benefits, upon
which FBT is leviable. FBT will be leviable at the rate of 30 per cent plus
applicable surcharge of 2.5 per cent or 10 per cent and education cess of 2
per cent on the tax including surcharge.
The due dates for the payment of FBT in the case of a company or a person
whose accounts are required to be audited under the Act, is the 31st of
October following the end of the financial year. In any other case, the due
date is the 31st of July following the end of the financial year.
The manner of payment of FBT is similar to that of advance tax, FBT being
paid or payable in each quarter, on or before the 15th day of the month
following such quarter, except for the quarter ending on 31 March, in case
of which the FBT will be payable on or before 15 March of the relevant
financial year.
Banking Cash Transaction Tax
Finance Act, 2005 has introduced a new concept of taxation; under which
amount withdrawn in excess of specified sum from certain categories of
accounts maintained with a bank is subject to Banking Cash Transaction Tax
(BCTT). Rate of BCTT is 0.1 per cent of the amount withdrawn from bank.
Banks would be liable to pay the BCTT and are authorized to recover the same
from the respective person. Banks are required to file returns with respect
to BCTT in the prescribed format.
Tax authorities (Income-tax authorities have been designated as tax
authorities) may carry out a detailed examination with respect to the return
filed by banks.
Surcharge
Surcharge is a temporary charge levied by the central government. It is
typically levied to meet unplanned government expenditure or to fund some
budgetary deficit. Over the past few years, surcharge has varied between 0
to 13 per cent.
Surcharge is normally computed as a percentage of the tax liability. All
domestic companies are liable to pay surcharge of 10 per cent. Surcharge is
also applicable on MAT and DDT. Individuals are liable to pay surcharge of
10 per cent where their taxable income exceeds INR 1,000,000 in a financial
year. Changes to the surcharge are generally announced annually.
An additional cess of 2 per cent in the form of education cess has
also been levied on tax including surcharge (i.e., the basic tax plus
surcharge are both increased by the additional surcharge.) For instance,
resident companies are liable to pay tax at 30 per cent plus 10 per cent
surcharge and education cess of 2 per cent, which amounts to a total tax
percentage of 33.66 per cent. Additional surcharge education cess has been
levied to meet out the expenditure on education.
Tax Incentives
Indian tax laws provide various tax incentives, for e.g.:
