Tax Impact

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This query is : Resolved

Kinjal B Shah (Querist)

03 July 2007 Hi,

Our Company is giving Rs.25,000/above Rs.25,000 as a gift.

It is chargeable to tax, so straight away 30.90% will be deducted as a tax.

Can any one provide better way for receiving this gift (under any other form) so that minimum tax will be deducted and we will get maximum out of Rs.25,000 ?????

Whther there is any scope of saving tax by paying FBT ????

Amit Thapar

Amit Thapar (Expert)

03 July 2007 If a company is giving a gift it is liable to FBT. FBT on 50% of the amount of gift shall be chargeable @ 33.99% and NOT @30.90%.

Kinjal B Shah

Kinjal B Shah (Querist)

03 July 2007 Dear amit,

We are aware that gift will be charged to fbt. but if it becomes taxable in hands of employee then it will not be chargeble to FBT and will be added to salary of employee in that case employee will have to pay tax at Max marginal rate Ie 30 + cess.

However, suppose if company decides to pay fbt will that mean the above will not be treated as taxable income in hands of employee in both the case (ie) gift of 25000 or above 25000

Kinjal B Shah

Kinjal B Shah (Querist)

03 July 2007 is there any question of Employer-Employer relationship?

So that it is taxable in the hands of employee only?????

Amit Thapar

Amit Thapar (Expert)

05 July 2007 Dear Sir,
If it is a gift in kind then it is only liable to FBT and it will not be liable to be taxed in the hands of the employee.It is not considered as a perquisite any more after the introduction of FBT and consequent amendment in Rule 3 of income tax rules.
My suggestion is that if the gift is below Rs. 50000 it should be given in cash. It will not be taxable in the hands of the receiver. Nothing to do with employer employee relationship in this case.
I hope i am able to give a little more clarity.

Kinjal B Shah

Kinjal B Shah (Querist)

07 July 2007 Dear Amit,

Gift is in cash

As u told that it is not taxable in the hands of receiver if it below Rs.50,000,

Then will Employer be liable to pay FBT on that amt ?????????

If the gift amt is more than Rs.50,000 then what will be the consequence,Whether Employee be chargeable to tax as a salry income or employer has to pay FBT.

Amit Thapar

Amit Thapar (Expert)

08 July 2007 Sir
In the chapter of FBT the word "Gift" only is mentioned. It is not clear whether it is cash or in kind. So I assume FBT wil be payable on it.
Secondly if the cash gift is above Rs. 50000 then it will be taxable in the hands of the receiver as " Income from other sources" u/s 56(2)(vi).
My consultancy charges Rs.25000 should be credited to my account. Just Kidding. :-)
Thanx

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