Are 100 % Tax Exempt Companies Liable to Pay FBT?
October 19, 2007 by taxworry · Leave a Comment
We are having a Software Outsourcing IT enabled Company. This is approved by the Software Technical Park of India (STPI), Govt. of India and it is a STPI Unit. We are completely exempted from income tax since all our income is on foreign currency and no income in Indian currency as per rule.Now will you please let me know whether the Fringe Benefit Tax will apply to our Company since we are completely exempted from tax. P. Natarajan
In my opinion , fringe benefit tax provision is applicable on you .This is on account of section 115WA(2) of the I T Act which makes it clear that employers though not liable to pay any tax on his total income , are still liable to pay tax on the fringe benefits .The said section 115WA is given as under:
Charge of fringe benefit tax.
115WA. (1) In addition to the income-tax charged under this Act, there shall be charged for every assessment year commencing on or after the 1st day of April, 2006, additional income-tax (in this Act referred to as fringe benefit tax) in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year at the rate of thirty per cent on the value of such fringe benefits.
(2) Notwithstanding that no income-tax is payable by an employer on his total income computed in accordance with the provisions of this Act, the tax on fringe benefits shall be payable by such employer.
Accordingly ,following employers may also have to pay tax on fringe benefits:
- 100% EOU ,SEZ units, Units Claiming deduction under Chapter VI-A;
- Loss making companies or firms despite having carried forward losses;
- Employers whose total income is exempt u/s 10A or 10B;
- Any other kind of employers who are defined u/s 115W of the I T Act whether or not earning profit.
However,trusts or any persons registered u/s 10(23C) or section 12AA and political parties registered under section 29A of the Representation of People Act are out of the purview of FBT.
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