Salary Reimbursements - Taxability under Salary of FBT
This query is : Resolved
22 February 2009
Our company reimburses to employees for fuel, telephon, vehicle running & maint.(including drivers salary) on the basis of supportings vouchers, which is actually a part of salary.
My different questions are :
1. Can we book the amounts as "Fuel Reimbursement", "Telephone Reimb", "Veh. R/M Reimb" or we should book directly under "Fuel expenses, Telephone Expenses, Vehicle R/M expenses".
2. Since all these reimbursements are paid to individual employees as per grade entitlements fixed, if we opt for paying FBT on these, will there be any problem in justifying that why we are not taxing it to individual employees and paying fbt on that.
3. In case of vehicle, our company also incurrs expenditure on pick/drop of employees by hiring out cabs/buses. Company also incurrs expenditure for other offical travelling (hiring of cars and expenses on owned cars) expenses done for employees, customers, etc.
Whether these expenses will also be covered under FBT along with depreciation on owned cars + expenses in point no. 1.
My different questions are :
1. Can we book the amounts as "Fuel Reimbursement", "Telephone Reimb", "Veh. R/M Reimb" or we should book directly under "Fuel expenses, Telephone Expenses, Vehicle R/M expenses".
2. Since all these reimbursements are paid to individual employees as per grade entitlements fixed, if we opt for paying FBT on these, will there be any problem in justifying that why we are not taxing it to individual employees and paying fbt on that.
3. In case of vehicle, our company also incurrs expenditure on pick/drop of employees by hiring out cabs/buses. Company also incurrs expenditure for other offical travelling (hiring of cars and expenses on owned cars) expenses done for employees, customers, etc.
Whether these expenses will also be covered under FBT along with depreciation on owned cars + expenses in point no. 1.
22 February 2009
If you show it as re-imbursements made to employees and debiting to your p&l account then automatically FBT will be attracted.
If you are paying it as part of salary and debtiting to their salary account, then it should be treated as part of their salary.
Depreciation and any interest paid for acquiring that vehile and expenses like maintaince, petrol, driver salary, and vehilce insurance has to be considered for fbt.
If you are paying it as part of salary and debtiting to their salary account, then it should be treated as part of their salary.
Depreciation and any interest paid for acquiring that vehile and expenses like maintaince, petrol, driver salary, and vehilce insurance has to be considered for fbt.
22 February 2009
My point is, we are ready to pay fbt on these rather than taxing it to individual employees, but showing them as reimbursements in books of accounts should not be a problem while auditing/assessment ??
Its actually a part of salary package and payable in the form of reimbursements.
Its actually a part of salary package and payable in the form of reimbursements.
22 July 2025
Got it, here’s a clear explanation regarding salary reimbursements and FBT (Fringe Benefit Tax) based on your scenario:
1. Booking Fuel/Telephone/Vehicle Running & Maintenance reimbursements
If these reimbursements are paid to employees as part of their salary package and are fixed entitlements, then ideally these should be shown as part of salary (salary expense) in your books.
However, if you book them as “Fuel Reimbursement,” “Telephone Reimbursement,” or “Vehicle R/M Reimbursement” separately (and these are paid on actuals with supporting vouchers), then they are treated as reimbursements and not part of salary.
Important: The classification impacts tax treatment and FBT liability.
2. Paying FBT on these reimbursements and not taxing employees
If you opt to pay FBT on these reimbursements rather than taxing them in employees’ hands:
You must treat these expenses as fringe benefits in your books.
Showing these as reimbursements to employees in books is acceptable, provided you maintain proper documentation and justify that these are part of salary package but paid as reimbursements.
Auditors or tax authorities may scrutinize this; hence, clear policies and documentary evidence explaining this treatment is crucial.
3. Vehicle-related expenses and FBT
Expenses related to pick/drop of employees via hired vehicles, official travel, depreciation on owned cars, driver salary, maintenance, insurance, petrol, interest on vehicle loan, etc. are covered under FBT.
These should be considered while calculating FBT liability.
Summary & Best Practice:
Scenario Treatment Comments
Fixed reimbursements paid as salary component Treat as part of salary Taxed in employee’s hands
Actual reimbursements with vouchers Treat as reimbursements FBT applicable on fringe benefits
Vehicle owned and running expenses Covered under FBT Include depreciation, driver salary etc.
Bottom line: You can show reimbursements in books, but since you pay FBT, keep clear records and explain that these are part of salary but reimbursed. This helps in audit/assessment.
1. Booking Fuel/Telephone/Vehicle Running & Maintenance reimbursements
If these reimbursements are paid to employees as part of their salary package and are fixed entitlements, then ideally these should be shown as part of salary (salary expense) in your books.
However, if you book them as “Fuel Reimbursement,” “Telephone Reimbursement,” or “Vehicle R/M Reimbursement” separately (and these are paid on actuals with supporting vouchers), then they are treated as reimbursements and not part of salary.
Important: The classification impacts tax treatment and FBT liability.
2. Paying FBT on these reimbursements and not taxing employees
If you opt to pay FBT on these reimbursements rather than taxing them in employees’ hands:
You must treat these expenses as fringe benefits in your books.
Showing these as reimbursements to employees in books is acceptable, provided you maintain proper documentation and justify that these are part of salary package but paid as reimbursements.
Auditors or tax authorities may scrutinize this; hence, clear policies and documentary evidence explaining this treatment is crucial.
3. Vehicle-related expenses and FBT
Expenses related to pick/drop of employees via hired vehicles, official travel, depreciation on owned cars, driver salary, maintenance, insurance, petrol, interest on vehicle loan, etc. are covered under FBT.
These should be considered while calculating FBT liability.
Summary & Best Practice:
Scenario Treatment Comments
Fixed reimbursements paid as salary component Treat as part of salary Taxed in employee’s hands
Actual reimbursements with vouchers Treat as reimbursements FBT applicable on fringe benefits
Vehicle owned and running expenses Covered under FBT Include depreciation, driver salary etc.
Bottom line: You can show reimbursements in books, but since you pay FBT, keep clear records and explain that these are part of salary but reimbursed. This helps in audit/assessment.
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