Telephone allowance

I think it will be taxable in hands of employee.

Since a company comes under the ambit of FBT, THE COMPANY would have to pay fbt( @ 33.99%) on the 20% of the telephone allowance.

It is true that Company comes under the purview of FBT, but Telephone Allowance given to Employees does not attract FBT. Because it is chargeable to tax u/s 17, while computing Income of the Employee.

Moreover if the Company gives fixed Telephone Allowance to its Directors, who are not employees of the Company, then it comes under the ambit of FBT.

As per sec 17 telephone expenses are chargeable to tax and not telephone allowance therefore telephone allowances paid to employee by employer will be chargeable to tax in the hands on emplyee and not in the hands of employer.

For details refere sec. 17(2) with rule 3.

As per section 17 If company want to pay telephone allowance to employee. full amount of telephone will be not taxable.