Is FBT Payable On Sale of Car At Concessional Price By The Employer?

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If employee purchases second hand car from his employer then it to be treat as perquisites and come under FBT and what rate tax or FBT employee or employer has to pay?Priti, Mumbai

The second hand car given to employee at concessional price, can be termed as perquisite u/s 17(2)(viii) of the I T Act taxable in employees hand. Therefore, it is outside the scope of Fringe Benefit Tax .The method of determination of value of the perquisite is given in section 17(2)(viii) itself in following words

The value of benefit to the employee arising from the transfer of any movable asset belonging to the employer directly or indirectly to the employee or any member of his household shall be determined to be the amount representing the actual cost of such asset to the employer as reduced by the cost of normal wear and tear calculated at the rate of 10% of such cost for each completed year during which such asset was put to use by the employer and as further reduced by the amount, if any, paid or recovered from the employee being the consideration for such transfer:

Provided that in the case of computers and electronic items, the normal wear and tear would be calculated at the rate of 50% and in the case of motor cars at the rate of 20% by the reducing balance method.

In plain words , the valuation will be done as under

Cost of the car xxxxxxxx

Less

i) 20% of the cost x nos of years xxxxxxxx

ii) Amount paid by employee xxxxxxxx

Perquisite Value xxxxxxxx