FBT on Conveyance, and on Tour and Travels.(Tax Planning)

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Ahsan Mansoori (Querist)

04 February 2008 HI,

1) Can a company provide fixed conveyance allowance in the form of the salary, and aviod the FBT on the same.? If yes then what is the limit of the Fixed conveyance allowance the company can provide.?
Such allowance if provided are benificial for both the employer and employee as it is exempted u/s 10(14)clause 1.
I have an information from my friend that such Fixed conveyance allowance shall be provided up to Rs. 84,000/- per annum per employee.

2)In respect of Tours & Travelling expenses,can a Fixed conveyance allowance be also provided so that FBT on the same is avoided.

3) Please clarify the above doubt, provide relevant section reference or rules reference if any.

Regards
Ahsan K.Mansoori

CA. Vineet Grover

CA. Vineet Grover (Expert)

05 February 2008 Hi Ahsan,

The company may pay fixed conveyance allowance to its mployees upto Rs.800 p.m. which is exempt in the hands of the employees. As the said amount forming part of salary, it shall not attract FBT.

The company may pay any amount as conveyance allowance depending on the its needs and fancies.

The treatment is the same. Even if you show tours and travels, the same shall be taxable in the hands of the employees.

For the purpose of tax planning, it is recommended that the company pay FBT at as low as 6% instead of taxing in the hands of the employees at 30% tax bracket.

Rgds/
Vineet