Fringe Benefit Tax (FBT) & Captive Centers
What is Fringe Benefit Tax?
According to the Finance Bill 2005 presented by the Government of India, Fringe benefit tax can be defined as a tax or charge on certain fringe benefits on the organizations or other business units which can be broadly categorized under the following.
Any privilege, service, facility or amenity, directly of indirectly, provided by an employer, whether by way of reimbursement or otherwise, to his employees (including former employees) Any free or concession ticket provided by the employer for private journeys of the employees or their family members Any contribution by the employer to an approved superannuation fund.
What is the impact on captive units?
- Travel and related expences: 10%
- Expence on salaries: 60%
- Insurance costs: 20%
- Maintenance: 10%
The division of the expenses can be broadly classified into four categories. The categories include the salaries of the employees, the infrastructure costs, the maintenance costs and travel and related expenses. The major cost components in this regard are the salary and infrastructure that is not in the purview of Fringe Benefit Tax calculations.
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