Implementation of FBT in Tally.ERP 9 of … · · 2014-04-18Version: Implementation of FBT in...

Implementation of FBT in Tally.ERP 9

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Version: Implementation of FBT in Tally.ERP 9/1.0/July 2009

i

Contents

Introduction Characteristics of FBT .............................................................................................................................. 1Scope & Applicability .............................................................................................................................. 1

Meaning of Fringe Benefits ................................................................................................................................. 1Meaning of Deemed Fringe Benefits ................................................................................................................... 2Valuation of Fringe Benefits................................................................................................................................ 3Rate of FBT .......................................................................................................................................................... 8

Features of FBT in Tally.ERP 9 ............................................................................................................... 9

Lesson 1: Configuring Tally.ERP 9 for FBT 1.1 Enabling FBT in Tally.ERP 9 ......................................................................................................... 101.2 FBT Statutory Info. ......................................................................................................................... 15

1.2.1 FBT Assessee Type .................................................................................................................................. 151.2.2 FBT Category .......................................................................................................................................... 16

1.3 Creating Masters .............................................................................................................................181.3.1 Expenses Ledger ...................................................................................................................................... 181.3.2 Fringe Benefit Tax Ledger ....................................................................................................................... 201.3.3 Bank Account ........................................................................................................................................... 21

Lesson 2: Transactions2.1 FBT on Expenses - Payment Voucher ............................................................................................ 232.2 Accounting Expenses Subject to FBT ............................................................................................ 252.3 Expenses Partly Subject to FBT ..................................................................................................... 302.4 Accounting FBT on Depreciation ................................................................................................... 352.5 Adjustments in FBT........................................................................................................................ 38

2.5.1 Reversal of Excess FBT ........................................................................................................................... 382.5.2 Accounting for Recoveries from Employees ............................................................................................ 412.5.3 Accounting for Exemption on Expenses ................................................................................................. 47

2.6 Payment of FBT .............................................................................................................................. 512.6.1 Advance FBT Payment ............................................................................................................................ 522.6.2 Quarterly FBT Payment .......................................................................................................................... 562.6.3 Payment of Interest & Penalties .............................................................................................................. 62

Lesson 3: Reports 3.1 FBT Reports .................................................................................................................................... 66

3.1.1 FBT Computation (Category wise) Report .............................................................................................. 663.1.2 Ledgers of FBT Category Report ............................................................................................................ 70

3.2 FBT Statutory Returns .................................................................................................................... 723.2.1 ITR 8 ........................................................................................................................................................ 72

Introduction

Fringe Benefit Tax (FBT) was introduced by Finance Act, 2005 by insertion of chapter XII-H in the Income Tax Act, 1961, containing sections 115W to 115WL. This provides for the levy of additional income tax on fringe benefits offered by employers to their employees.

Characteristics of FBTIt is a tax on expenditure, not on incomeIt is a tax on employers, not on employeesIt is a surrogate tax on employersIt is a tax on benefits enjoyed collectively by employees and cannot be attributed to individ-ual employeesIt is payable by the employer only if he has employees based in IndiaIt is payable irrespective of whether the employer is liable to pay income tax on his total incomeIt is in the nature of an additional income tax

Scope & ApplicabilityFBT is levied on an employer who provides fringe benefits or deemed fringe benefits to an employee. These benefits are not chargeable to tax in the hands of the employee.Section 115WA provides that in addition to the income tax charged under the Act, there shall be an additional income tax charged for every assessment year commencing on or after the 1st day of April 2006. This is in respect of the fringe benefits provided or deemed to have been provided by an employer to his employees during the previous year, at the rate of 30% on the value of such fringe benefits.

Meaning of Fringe BenefitsSection 115WB(1) defines fringe benefits to mean:A. Any privilege, service, facility or amenity directly or indirectly provided by an employer to his

employees (including former employees) by reason of their employment. It also includes reim-

1

Introduction

bursements, made by the employer either directly or indirectly to the employees for any pur-pose

B. Any free or concessional tickets provided by the employer for private journeys undertaken by the employees or their family members

C. Contributions by the employer to an approved superannuation fund D. Any specified security or sweat equity shares allotted or transferred, directly or indirectly, by

the employer free of cost or at concessional rate to his employees (including former employee or employees). [This clause is inserted by Finance Act, 2007 with effect from 01/04/2008]

Meaning of Deemed Fringe BenefitsSub-Section (2) of section 115WB provides that fringe benefits shall be deemed to have been provided if the employer has, in the course of his business or profession (including any activity whether or not such activity is carried on with the object of deriving income, profits or gains), incurred any expense on or made any payment for the following purposes, namely:A. EntertainmentB. Provision of hospitality of every kind to any person, whether by way of food or beverages or in

any other manner excluding food or beverages provided to the employees in the office or fac-tory or non-transferable paid vouchers usable only at eating joints or outlets

C. Conference, excluding fee for participation by the employees in any conferenceD. Sales promotion, including publicity but excluding specified expenditure on advertisementE. Employee welfare, excluding any expenditure or payment made to fulfill any statutory

obliga¬tions or mitigate occupational hazards or provide first aid facilities in the hospital or dis-pensary run by the employer

F. ConveyanceG. Use of hotel, boarding and lodging facilitiesH. Repair, running (including fuel) and maintenance of motorcars and the amount of depreciation

thereonI. Repair, running (including fuel) and maintenance of aircrafts and the amount of depreciation

thereonJ. Use of telephone (including mobile phone) other than expenditure on leased telephone linesK. Maintenance of any accommodation in the nature of guest house other than accommodation

used for training purposesL. Festival celebrationsM. Use of health club and similar facilitiesN. Use of any other club facilitiesO. GiftsP. ScholarshipsQ. Tour and travel (including foreign travel)

The major distinction between fringe benefits and deemed fringe benefits is that fringe benefits are subject to FBT only when provided to an employee or his family members, whereas deemed fringe benefits are taxable, irrespective of whom they are provided to.

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Introduction

Valuation of Fringe BenefitsSection 115WC provides the valuation mechanism for fringe benefits and deemed fringe benefits.No valuation mechanism has been provided for fringe benefits under 115WB(1)(a) and in respect of benefits under 115WB(1)(b), 115WB(1)(c) & 115WB(1)(d), the full value of fringe benefits are liable to FBT.The fringe benefits in respect of free tickets and concessional tickets are applicable only to those employers who are engaged in the business of carriage of passengers or goods i.e., airlines, shipping companies, tourist bus/ taxi operators, and so on. The value charged to the public as reduced by the amount recovered from the employee is the value of the fringe benefit. The fringe benefits in respect of contributions to superannuation fund are applicable on amounts exceeding one lakh rupees in case of each employee. The value of fringe benefits under 115WB(1)(d) is the fair market value* of the specified security or sweat equity shares on the date on which the option** vests with the employee as reduced by the amount actually paid by, or recovered from, the employee in respect of such security or shares [This is inserted by the Finance Act 2007, with effect from 01/04/08].

Table showing valuation of Fringe Benefits

Nature of Fringe Benefits Section RateAny free or concession ticket provided by the employer for private journeys of the employees or their family members

115WB(1)(b) 100%

Any contribution by the employer to an approved superannuation fund for employees

115WB(1)(c) 100%

Any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees).

115WB(1)(d) 100%

Provision of Service, Facility Or Amenity to Employee 115WB(1)(A) 100%

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Introduction

Table showing valuation of Deemed Fringe Benefits

In addition to the above classification, some segments of the industry have been given conces-sional rates of valuation, having regard to the nature of their business as shown:

Sl.No. Nature of Fringe Benefits Section Rate1. Conference 115WB(2)(C) 20%2. Conveyance 115WB(2)(F) 20%3. Employees’ Welfare 115WB(2)(E) 20%4. Entertainment 115WB(2)(A) 20%5. Festival Celebrations 115WB(2)(L) 50%6. Gift 115WB(2)(O) 50%7. Hotel, Boarding, Lodging 115WB(2)(G) 20%8. Maintenance of Guest House 115WB(2)(K) 20%9. Provision of Hospitality of Every Kind 115WB(2)(B) 20%10. Repair, Running and Maintenance of Aircrafts 115WB(2)(I) 20%11. Repair, Running and Maintenance of Cars 115WB(2)(H) 20%12. Sales Promotion Including Publicity 115WB(2)(D) 20%13. Scholarship 115WB(2)(P) 50%14. Tour and Travel (including foreign travel) 115WB(2)(Q) 5%15. Use of Health Club and Similar Facilities 115WB(2)(M) 50%16. Use of Other Club Facilities 115WB(2)(N) 50%17. Use of Telephone 115WB(2)(J) 20%

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Introduction

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115WB(1)(b)

Any Free or conces-sional ticket pro-vided by the employer for private journeys of his employee or their family members

100% will be taxed under Section 115 WB (2) (F) i.e. 20%

will be taxed under Section 115 WB (2) (F) i.e. 20%

will be taxed under Section 115 WB (2) (F) i.e. 20%

will be taxed underSection 115 WB (2) (F) i.e. 20%

will be taxed underSection 115 WB (2) (F) i.e. 20%

will be taxed underSection 115 WB (2)(F)

will be taxed underSection 115 WB (2)(F) i.e. 20%

115WB(1)(c)

Any contri-bution by the employer to an approved supperan-nuation fund for employees

100% 100% 100% 100% 100% 100% 100% 100%

115WB(1)(d)

Any specified security or sweat equity shares allotted or trans-ferred, directly or indirectly, by the employer free of cost or at con-cessional rate to his employees (including former employee or employ-ees)

100% 100% 100% 100% 100% 100% 100% 100%

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115WB(2)(A)

Entertainment 20% 20% 20% 20% 20% 20% 20% 20%

115WB(2)(B)

Provision of hospitality of every kind by the employer to any person, whether by way of provision of food or beverages or in any other manner whatsoever and whether or not such provision is made by reason of any express or implied contract or custom or usage of trade but does not includesi) any expenditure on, or payment for, food or beverages provided by the employer to his employees in office or factory; (ii) any expenditure on or payment through paid vouchers which are not transferable and usable only at eating joints or outlets;

20% 5% 20% 20% 20% 20% 5% 20%

115WB (2)(C)

conference (other than fee for participa-tion by the employees in any conference). For the purpose of this clause, any expenditure on conveyance, tour and travel (including foreign travel), on hotel, or boarding and lodging in connection with any conference shall be deemed to be expenditure incurred for the purposes of conference;

20% 20% 20% 20% 20% 20% 20% 20%

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115WB(2)(D)

Sales promotion including publicity: Pro-vided that any expenditure on advertise-ment: (i) being the expenditure (including rental) on advertisement of any form in any print (including journal, catalogues or price lists) or electronic media or trans-port system(ii) being the expenditure on the holding of, or the participation in, any press con-ference or business convention, fair or exhibition;(iii) being the expenditure on sponsor-ship of any sports event or any other event organised by any Government agency or trade association or body; (iv) being the expenditure on the publica-tion in any print or electronic media of any notice required to be published by or under any law or by an order of a court

20% 20% 20% 20% 20% 20% 20% 20%

115WB(2)(E)

Employees' welfare — For the purpose of this clause, any expenditure incurred or payment made to fulfil any statutory obligation or mitigate occupational hazards or provide first aid facilities in the hospital or dispensary run by the employer shall not be considered as expenditure for employee's welfare;

20% 20% 20% 20% 20% 20% 20% 20%

115WB(2)(F)

Conveyance 20% 20% 20% 5% 5% 5% 20% 20%

115WB(2)(G)

Use of hotel, boarding and lodging facili-ties

20% 5% 20% 20% 5% 5% 20% 20%

115WB(2)(H)

Repair, running (including fuel), mainte-nance of motor cars and the amount of depreciation thereon;

20% 20% 5% 20% 20% 20% 20% 20%

115WB(2)(I)

Repair, running (including fuel) and maintenance of aircrafts and the amount of depreciation thereon;

20% 0% 20% 20% 20% 20% 20% 20%

115WB(2)(j)

Use of telephone (including mobile phone) other than expenditure on leased telephone lines;

20% 20% 20% 20% 20% 20% 20% 20%

115WB(2)(K)

Maintenance of any accommodation in the nature of guest house other than accommodation used for training pur-poses

20% 20% 20% 20% 20% 20% 20% 20%

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Introduction

Rate of FBTThe following are the rates of tax for different categories of employers:

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115WB(2)(L)

Festival celebrations 50% 50% 50% 50% 50% 50% 50% 50%

115WB(2)(M)

Use of health club and similar facilities

50% 50% 50% 50% 50% 50% 50% 50%

115WB(2)(N)

Use of any other club facilities 50% 50% 50% 50% 50% 50% 50% 50%

115WB(2)(O)

Gifts 50% 50% 50% 50% 50% 50% 50% 50%

115WB(2)(P)

Scholarships 50% 50% 50% 50% 50% 50% 50% 50%

115WB(2)(Q)

Tour and Travel (Includingforeign travel)

5% 5% 5% 5% 5% 5% 5% 5%

Category ofEmployer

Tax Rateof FBT

Surcharge Education Cess HigherEduc. Cess

EffectiveRate of FBT

Firms/ Domestic Companies/ AJPs

30% 10% 2% 1% 34.00%

Non-Domestic Companies

30% 2.5% 2% 1% 31.68%

Local Authority 30% 0% 2% 1% 30.91%

AOP/BOI Whose total income does not exceed Rs.10,00,000

30% 0% 2% 1% 30.91%

AOP/BOI whose total income exceeds Rs.10,00,000

30% 10% 2% 1% 34.00%

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Introduction

Features of FBT in Tally.ERP 9 The FBT module integrated with Tally.ERP 9 takes care of all fringe benefits transactions and automatically computes the FBT amount payable to the government. The user can also view and generate various FBT challans, computation reports, outstanding statements and other related reports when required.

The FBT features in Tally.ERP 9, help in eliminating possibilities of errors during data entry and reduces incorrect remittances and also facilitates payment of penalties.

The FBT functionality in Tally.ERP 9 has the following features:It is simple and user-friendlyIt is quick and easy to set up and useAllows FBT and Non-FBT ledgers in the same voucherAllows auto and manual calculation of FBT amountFacilitates payment of advance tax, tax on regular assessment and self assessment taxSupports transactions involving interest, penalties & othersGenerates FBT Challan and other FBT related reportsTracks bill-wise (bill-by-bill) details, automatically calculates FBT payable and adjusts any advance tax or recoveries made and also provides flexibility to make adjustments laterAllows challan management and printing to ensure prompt and accurate filing of taxThe auto helper feature prevents erroneous data inputs and expedites voucher entry

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Lesson 1: Configuring Tally.ERP 9 for FBT

The FBT module integrated with Tally.ERP 9 takes care of all fringe benefits transactions and automatically computes the FBT amount payable to the government. The user can also view and generate various FBT challans, computation reports, outstanding statements and other related reports when required.The FBT features in Tally.ERP 9, help in eliminating possibilities of errors during data entry and reduces incorrect remittances and also facilitates payment of penalties.

1.1 Enabling FBT in Tally.ERP 9It takes a one-time configuration in Tally.ERP 9 for FBT features to be activated. Follow the steps given below to enable FBT in Tally.ERP 9 for a new company, M/s. Coramandel Industries (P) Ltd.

M/s. Coramandel Industries (P) Ltd. is a domestic company, which manufactures cement and other waterproofing components.

Step 1: Create Company

In the Company Creation Screen,Specify Coramandel Industries (P) Ltd. as the Company Name and Address details Select India in the Statutory Compliance for fieldSpecify the State, Pin code & Accounts with or without Inventory details

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Configuring Tally.ERP 9 for FBT

The completed Company Creation screen is displayed as shown.

Figure 1.1 Company Creation Screen

Press Enter to Accept

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Step 2: Press F11: Statutory & Taxation

Set Enable Fringe Benefit Tax (FBT) to YesEnable Set/Alter FBT Details to Yes and press Enter

Figure 1.2 Statutory & Taxation Features screen

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Step 3: Enter Company FBT Assessee DetailsEnter PAN / Income Tax Number details of the companySelect the Assessee Type as Firms/ Domestic Companies

Figure 1.3 Company FBT Assessee Details

Set Is Surcharge Applicable to Yes

Select Assessee Type as Others from the List of Assessee Category (in the case of businesses engaged in any of the trades mentioned in the drop down list, select the rele-vant Assessee Category) and press Enter

Surcharge is applicable to all the assesses except Local Authorities.

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Figure 1.4 Company FBT Assesse Category

The completed F3: Statutory & Taxation Features screen is displayed as shown.

Figure 1.5 F3: Statutory & Taxation Features Screen

Press Enter to accept the F3: Statutory & Taxation Features screen

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1.2 FBT Statutory Info.The Statutory Masters containing various FBT categories, Rate of FBT and Assessable percent-age of fringe benefits are automatically loaded soon after enabling FBT in Tally.ERP 9.

For the Statutory Masters, the following details are preset as per Income Tax Laws:Date of ApplicabilityRate of FBTSurchargeAddl. Surcharge (Cess)Addl. Education (Cess)

1.2.1 FBT Assessee TypeTo view predefined FBT Assessee Types masters in Tally.ERP 9:Go to Gateway of Tally > Display > Statutory Info. > FBT Assessee Type

Figure 1.6 FBT Assessee Type

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Select Artificial Juridical Person from the list of Assessee Type and press Enter

Figure 1.7 FBT Assessee Type – Artificial Juridical Person

1.2.2 FBT CategoryTo view predefined FBT Category masters in Tally.ERP 9:Go to Gateway of Tally > Display > Statutory Info. > FBT Category

Figure 1.8 FBT Category Display

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Select Conference as FBT Category from the List of FBT Categories and press Enter

Figure 1.9 FBT Category Display - Conference

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1.3 Creating MastersOnce you have enabled the company for FBT, create necessary ledgers such as Expenses ledger, Party ledgers and FBT ledger masters.

1.3.1 Expenses Ledger

To create a Conveyance ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create

In the Ledger Creation Screen,

Type Conveyance as the Ledger Name Group it under Indirect Expenses group Set Inventory values are affected to NoSet Is FBT Applicable to YesSelect Conveyance as FBT Category from the List of FBT Categories

Ledger Under Inventory Values are affected

Is FBT applicable?

Default FBT Category

Conveyance Indirect Expenses No Yes Conveyance

Separate ledgers for Surcharge, Education Cess and Higher Education Cess are not required, as Tally.ERP 9 automatically calculates Surcharge, Education Cess and higher education cess on the basic tax.

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Figure 1.10 FBT Category Selection

Set Allow Exemption Amount in Vouchers to NoThe completed Ledger Creation screen is displayed as shown.

Figure 1.11 Completed Ledger Creation Screen

Press Enter to Accept.

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1.3.2 Fringe Benefit Tax Ledger

Go to Gateway of Tally > Accounts Info. > Ledgers > Create

In the Ledger Creation screen,Type the FBT Payable as the Ledger NameSelect the group Duties & Taxes in the field UnderSelect FBT in the field Type of Duty/Tax

Figure 1.12 Type of Duty/Tax Selection

The option, Is FBT Applicable, is available to enter FBT details for those ledgers grouped under Direct, Indirect Expenses, Fixed Assets, Misc. Expenses (Assets) & Sub Groups. The ledgers created under Fixed Assets group are used for computing FBT on Operating & Financial costs (viz., repair, running and mainte-nance expenses such as lease rentals, fuel, driver salary, interest on Loans & Depreciation etc., on motor cars and aircrafts).

Ledger Under Type of Duty/Tax Inventory Values are affected

FBT Payable Duties & Taxes FBT No

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Set Inventory values are affected to NoThe completed FBT Payable ledger creation screen is displayed as shown.

Figure 1.13 FBT Payable Ledger Creation

Press Enter to Accept

1.3.3 Bank Account

Go to Gateway of Tally > Accounts Info > Ledgers > Create

In the Ledger Creation screenType the HDFC Bank as the Ledger NameSelect the group Bank Accounts in the field UnderUnder Mailing Details enter Address, State, PIN Code, A/c No. Branch Name and BSR Code of the Bank.

Ledger Under Effective Date for Reconciliation

Opening Balance

HDFC Bank Bank Accounts 1-04-2008 Rs. 20,00,000

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Enter Rs. 20,00,000 in the Opening Balance field

Figure 1.14 Completed Bank Ledger creation Screen

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Lesson 2: Transactions

The expenditure is liable to FBT when incurred and not when charged off to Profit & Loss A/c. In Tally.ERP 9, you can account for expenses implying FBT with the help of payment voucher, Journal Voucher or Purchase Voucher, as required. Consider the following scenarios to exemplify FBT in Tally.ERP 9.

2.1 FBT on Expenses - Payment VoucherExample 1:On 11th April, 2008, M/s. Coramandel Industries reimbursed Rs. 5,400/- to Mr. Ashok (Sr. Manager – Sales) towards Conveyance expenses vide Ch. No. 015479.

The same is accounted through a payment voucher, as shown.

Create a Payment Voucher Go to Gateway of Tally > Accounting Vouchers > F5: Payment Voucher

Set UpIn F12: Configure (Payment Configuration)

Set Use Single Entry mode for Pymt/Rcpt/Contra to Yes

1. Press F2 and change date to 11-04-20082. Select HDFC Bank in the Account field3. Select Conveyance in the Particulars column and press Enter4. Enter 5400 in the Amount field5. Enter the Cheque No. and details of the transaction in the Narration field

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Transactions

The completed Expenses Payment Voucher is displayed as shown.

Figure 1.1 Payment Voucher Screen

6. Press Enter to Accept

The FBT calculations are automatically done in Tally.ERP 9, based on the FBT categories defined in the ledger masters.

Tally.ERP 9 also allows you to pass the above voucher in double entry mode.

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Transactions

FBT ComputationTo view the Fringe Benefit Tax details Go to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT Computation

Figure 1.2 FBT Computation Report

The FBT payable is computed automatically based on the predefined FBT Classifications, at the prescribed rates on the assessable value of fringe benefits out of the total amount of fringe benefits paid.

2.2 Accounting Expenses Subject to FBTExample 2:On 16th April, 2008, Dynamic Cable Network submitted a bill (No. 432) for Rs. 2,250/- towards satellite television services rendered by them. Coramandel Industries issued a cheque (vide no. 015499) on the same day.

The following example illustrates FBT transaction using a Journal Voucher. Before passing the Journal Voucher, create the following ledgers.

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Transactions

Expense Ledger Accounts

Party Ledgers

Setup:In F12: Configure (Journal Configuration)Set Allow selection of FBT Category during entry to Yes

Figure 1.3 Journal Configurations

Create Journal Voucher Go to Gateway of Tally > Accounting Vouchers > F7: Journal Voucher

Journal voucher is generally used to record transactions on due basis i.e., firstly a due entry in favour of the party is created when the bill is received and then at the time of settlement of the referred bill, a payment entry is passed.


Is FBT applicable?


Entertainment Expenses

Indirect Expenses No Yes Not Applicable

Set Allow Exemption Amount in Vouchers to No

Ledger Under Maintain Balances bill-by-bill

Inventory Values are affected

Dynamic Cable Network Sundry Creditors Yes NoEnter the Mailing Details and Tax Information

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Transactions

1. Press F2 and change date to 16-04-20082. Select Entertainment Expenses in the field Debit and press Enter

The FBT Category selection screen is displayed as shown.

Figure 1.4 FBT Category selection

3. Select Entertainment as the FBT Category from the List of FBT Categories 4. Enter 2250 in the Amount field5. Select Dynamic Cable Network in the Credit field6. In the Bill–wise Details screen,

Specify the Type of Ref as New Ref

When Allow selection of FBT category during entry is set to Yes in F12: Voucher Entry Configuration, Tally.ERP 9 facilitates Assigning/ Altering of FBT categories during voucher entry.

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Transactions

Name as 432 and press Enter7. Enter the transaction details in the Narration field

The completed Journal Voucher is displayed as shown.

Figure 1.5 Journal Voucher screen


To record the payment made to M/s. Dynamic Satellite Network, pass a Payment Entry for the amount paid.

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The completed Payment Voucher is displayed as shown

Figure 1.6 Completed Payment Voucher Screen

FBT Computation To view the Fringe Benefit Tax detailsGo to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT Computation


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2.3 Expenses Partly Subject to FBT In the event, where a part of the expenditure is not subject to FBT and the balance amount which is subject to FBT (Expenses incurred in respect of benefits offered to employees), it is crucial to determine the accurate value of expenses for computation of FBT. Tally.ERP 9 provides the flexibility to enter information in the same voucher using a single expense ledger. Consider the following scenario to illustrate the Expenses Partly Subject to FBT.

Example 3:On 20th April, 2008, M/s. Coramandel Industries received a bill (vide no. 537) from Krishna Petro Industries for Rs. 10,000/- towards fuel charges for the following purposes: Company Cab — Rs. 4,000/- Industrial Fuel — Rs. 6,000/-

The following example illustrates FBT transaction using a Purchase Voucher. Before passing the Voucher, create the following required ledgers.

Expenses Ledger Account

Party Ledger

Create Purchase VoucherSetup:

In F12: Configure (Purchase Invoice Configuration)Ensure that Allow selection of FBT Category during entry is set to YesSet Use Common Ledger A/c for Item Allocation to No


Is FBT applicable?


Fuel Charges Direct Expenses No Yes Not ApplicableSet Allow Exemption Amount in Vouchers to No

Ledger Under Maintain Balances bill-by-bill

Inventory Values are affected

Krishna Petro Industries Sundry Creditors Yes NoEnter the Mailing Details and Tax Information

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Figure 1.8 Purchase Invoice Configuration

Go to Gateway of Tally > Accounting Vouchers > press F9: Purchase (Account Invocie Mode)

1. Press F2 and change date to 20-04-20082. Press Alt + I: Account Invoice 3. Type 537 in the Ref field4. Select Krishna Petro Industries in Party’s A/c Name5. Select Fuel Charges in Particulars column and press Enter. The FBT Category dis-

plays as Not Applicable as it has not been defined during ledger creation6. Select Repair, Running & Maintenance of Motor Cars from the List of FBT Cate-

gories

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Figure 1.9 FBT Category Selection

7. Enter Rs. 4000 in the Amount field8. Select Fuel Charges again in Particulars column and Press enter to view FBT Cate-

gory screen.

Figure 1.10 Fuel Charges Ledger Selection

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The LIst of FBT Categories screen is displayed as shown.

Figure 1.11 FBT Category selection

9. Press Enter to Accept the FBT category as Not Applicable10. Press Enter to skip the Rate field11. Enter Rs. 6000 in the Amount field12. In the Bill–wise Details screen accept the default bill allocation13. Enter the transaction details in the Narration field

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The completed Purchase Voucher is displayed as shown.

Figure 1.12 Completed Purchase Voucher

14. Press Enter to AcceptFBT ComputationTo View the FBT DetailsGo to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT Computation

Figure 1.13 FBT Computation

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2.4 Accounting FBT on DepreciationAs per the provisions of Chapter XII H of the Income Tax Act, 1961, the expenditure on running and maintenance of cars includes lease rentals (both financial and operating), depreciation on cars under the income-tax law, fuel, driver’s salary, parking charges and also interest on loans for cars. In Tally.ERP 9, the user can account for FBT on operating and financial costs as and when charged off to the Profit & Loss A/c but however expenses such as depreciation, which are generally calculated at the end of financial year for tax purposes, are required to be recorded through an optional voucher viz., Memorandum voucher (which does not affect Accounting or Inventory records) to compute FBT on such expenses. Consider the following example to illus-trate the same.

Example 4:As per the Income Tax Act, depreciation @ 15% is chargeable on Motor Car. For the purpose of Fringe Benefit Tax, M/s. Coramandel Industries accounted for Depreciation on Motor Car @ 15% for the quarter ending 30th June 2008.

The same is accounted for by passing a Memorandum Voucher as shown. Before passing the Voucher, create the following ledgers.

Fixed Assets Ledger

Expenses Ledger

Setup: In F11: Features (Accounting Features)

Set Use Reversing Journals & Optional Vouchers to Yes


Is FBT applicable?

Opening Balance

Motor Car Fixed Assets No No Rs. 5,00,000


Is FBT applicable?


Depreciation on Motor Car

Indirect Expenses

No Yes Repair, Running and Main-tenance of Motor Cars

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Go to Gateway of Tally > F11: Company Features > F1: Accounting Features

Figure 1.14 F 1: Accounting Features

Step 1: Create Memorandum Voucher

Go to Gateway of Tally > Accounting Vouchers > Ctrl + F10: Memorandum Voucher1. Press F2 and change date to 30-06-20082. Select Depreciation on Motor Car in Particulars column 3. In the FBT Category selection screen accept the default FBT Category 4. Enter Rs. 25,000 in the Debit field5. Select Motor Car in Particulars column to credit, 6. Press Enter to accept the amount in the Credit column7. Enter the transaction details in the Narration field

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Transactions

The completed Memorandum voucher is displayed as shown.

Figure 1.15 Memorandum Voucher


FBT Computation Go to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT ComputationSelect Repair, Runnig, Maintainence of Motor Cars and press enter to view Ledger of FBT Category report to view the FBT on Depreciation

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Transactions

The Ledger of FBT Category report is displayed as shown

Figure 1.16 Computation Report showing Depreciation on Motor Car

2.5 Adjustments in FBTFBT is calculated at the prescribed rate on the assessable value of fringe benefits and deemed fringe benefits on a presumptive basis using certain expenses as a measure. In this backdrop, the employer may erroneously compute tax on or include any non-official business expenditure or expenses of personal nature or any advance expenses (not actually incurred) or any expense dis-allowed or outside the ambit of the FBT. At such times, it is necessary to adjust the excess tax paid or payable.

2.5.1 Reversal of Excess FBTAny excess advance tax paid in the preceding quarter can be adjusted against the advance tax for the subsequent quarter(s). In Tally.ERP 9, you can adjust the excess FBT paid for any preceding quarter using debit notes.

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Example 5:With reference to the previous example (Refer Example 3), where Rs. 10,000/- was paid against B.No. 537 dated 20-04-08, towards Cab and Industrial Fuel expenses.On 20th May, 2008 a revised invoice from M/s. Krishna Petro Industries was received for Rs. 9,500/- and it was reported that Rs. 500/- out of Rs. 4,000/- (Cab Fuel) had been wrongly included in the bill.The same is accounted as shown.Setup: In F11: Features (Accounting Features)

Set Use Debit/Creidt Notes to YesGo to Gateway of Tally > F11: Company Features > F1: Accounting Features

Figure 1.17 F1: Accounting Features Screen

Step 1: Create Debit Note Go to Gateway of Tally > Accounting Vouchers > Ctrl + F9: Debit Note

1. Press F2 and change date to 20-05-20082. Select Krishna Petro Industries in Debit field3. Enter Rs. 500 in the Debit field4. In the Billwise Details screen:

Select Agst Ref in the Type of Ref field

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Transactions

Select 537 in the Name field Press Enter to accept the Amount

5. Select Fuel Charges in Credit field6. Select the FBT Category as Repair, Running and Maintenance of Motor Cars and

press Enter

Figure 1.18 Debit Note - FBT Category Selection

7. Press Enter to accept the amount in the Credit column8. Enter the transaction details in the Narration field

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Transactions

The completed Debit Note voucher is displayed as shown

Figure 1.19 Completed Debit Note Voucher


2.5.2 Accounting for Recoveries from EmployeesAs per section 115WC(1)(a), where the employer recovers from its employees, any amount of expenditure incurred for the purposes listed in clauses (A) to (P) of sub -section (2) of section 115WB, the value of the fringe benefits shall be determined with reference to the net expenditure and not gross expenditure. In other words, where there are recoveries from employees towards fringe benefits or deemed fringe benefits, such items are liable to FBT on the amount of expendi-ture net of recoveries. However, where the recovery is from third party, the gross amount of expenditure is subject to FBT.

For example, if an employer incurs a total expenditure of Rs. 15,000 on repair, running and main-tenance of motor cars, and recovers Rs. 2,000/- from its employees, the value of the fringe benefits in respect of repair, running and maintenance of motor-cars shall be calculated on the basis of the net expenditure of Rs. 13,000 (i.e, Rs. 15,000 minus Rs. 2,000).

Tally.ERP 9 allows you to account for recoveries from employees and automatically adjusts the value of Fringe Benefits subject to FBT in accordance with the statutes.

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Example 6: On 22nd May 2008, Coramandel Industries recovered Rs. 1,250/- from its employees towards Entertainment Expenses. The FBT on the recovered amount was reversed accordingly.Create necessary FBT Recovery voucher class to execute the above transaction.

Step 1: Create Voucher Class Go to Gateway of Tally > Accounts Info. > Voucher Types > Alter > select Journal Voucher Type and press Enter

1. Navigate to the field Name of Class2. Type FBT Recovery as Voucher Class and press Enter3. The Voucher Type Class Allocation screen is displayed4. In the Default Voucher Type Class Allocation screen,

Set Use Class for FBT Recovery to Yes

The FBT Recovery voucher class screen is displayed as shown.

Figure 1.20 FBT Recovery Class

5. Press Enter to return to Voucher Type Alteration screen

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The completed Voucher Type screen is displayed as shown.

Figure 1.21 Journal Voucher Type Screen

6. Press Enter to save the voucher type

Step 2: Create Journal VoucherSetup:In F12: Configure (Journal Configuration)

Set Allow Cash Accounts in Journals to Yes

Figure 1.22 Journal Configuration

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Transactions

Go to Gateway of Tally > Accounting Vouchers > Press F7 and select FBT Recovery as Voucher Class

Figure 1.23 Journal Voucher - FBT Voucher Class Selection

1. Press F2 and change date to 22-05-20082. Select HDFC Bank in the Debit field (If the same is adjusted in the monthly salary,

otherwise select the respective Employee ledger, if any)3. Enter Rs. 1250 in the Debit Amount field4. Select Entertainment Expenses in the Credit field5. In FBT Category screen select Entertainment as the applicable FBT Category

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Transactions

The FBT Category screen is displayed as shown.

Figure 1.24 Journal Voucher - FBT Category Selection

6. Press Enter to accept the amount in the Credit Amount field7. Enter the transaction details in the Narration field

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Transactions

The completed Journal Voucher is displayed as shown.

Figure 1.25 FBT Recovery Voucher


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2.5.3 Accounting for Exemption on Expenses

Example 7:On May 29, 2008 M/s. Coramandel Industries paid a sum of Rs. 2,30,000/- as the employer’s con-tribution towards an approved superannuation fund.

The same is accounted as shown:Create Employers Contribution to Superannuation Fund ledger

Go to Gateway of Tally > Accounts Info. > Ledger > Create

In the Ledger Creation Screen,

Type Employers Contribution to Superannuation Fund as the Ledger Name Group it under Indirect Expenses group Set Inventory values are affected to NoIn Rounding Method field select Not Applicable Set Is FBT Applicable to YesIn FBT Category screen Select Group Term Superannuation Fund as FBT Category from the List of FBT

Categories Set Allow Exemption Amounts in Vouchers to Yes


Is FBT applicable?


Allow Exemption Amount in Vouchers

Employer Contribution to Superan-nuation Fund

Indirect Expenses

No Yes Group Term Superannua-tion Fund / Insurance

Yes

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Transactions

Figure 1.26 FBT Category Details

Figure 1.27 Completed Ledger Creation

Press Enter to accept

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Step 2 : Create Payment Voucher

Go to Gateway of Tally > Accounting Vouchers > F5:Payment Voucher

1. Press F2 and change date to 29-05-20082. Select HDFC Bank in the Account field3. Select Employer Contribution to Superannuation Fund in the Particulars column4. In the FBT Category screen accept the default FBT Allocation details5. Enter Rs. 230000 in the Amount field 6. The FBT Amount Exempt screen appears,

Enter 100000 as the exempted amount

Figure 1.28 FBT Exempt Amount

7. Enter the Cheque No. and details of the transaction in the Narration field

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Transactions

The completed Payment Voucher is displayed as shown.

Figure 1.29 Payment Voucher

8. Press Enter to accept.

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Transactions

2.6 Payment of FBTFringe Benefits Tax (FBT) is to be paid in advance during any financial year in respect of the current fringe benefits, which would be chargeable to tax in the assessment year following that financial year. The employer is required to pay advance tax at the rate of 30% of the current fringe benefits paid or payable in each quarter.

The advance tax is to be paid on or before 15th of the succeeding month following the quarter in which the fringe benefits are paid or payable. But, in the case of the last quarter ending on 31st of March of the financial year, the advance tax shall be payable on or before 15th March of the same financial year. The advance tax for the first three quarters is to be paid on the basis of actual expenditure incurred in each quarter. However, in the last quarter the advance tax may be paid on an estimate basis since the tax has to be paid before the closure of the financial year.

Any excess advance tax paid for the preceding quarter can be adjusted against the advance tax for the subsequent quarter(s). With effect from July 2005, challan No. ITNS 283 should be used for payment of Fringe Benefit Tax (FBT) and the tax amount should be rounded off to the nearest rupee.Due Dates for payment of FBTEvery assessee who is liable to pay advance tax has to pay tax on the current fringe benefits cal-culated in the manner laid down.Advance tax on the current fringe benefits shall be payable by1. All the companies, who are liable to pay Advance Tax in four installments during each financial

year and the due date of each installment and the amount of such installment shall be as spec-ified in below :

2. All the assessees (other than companies), who are liable to pay the same in three installments during each financial year and the due date of each installment and the amount of such install-ment shall be as specified in below :

Due Date of Installment Amount PayableOn or before the 15th June Not less than fifteen per cent of such advance tax.On or before the 15th September Not less than forty-five per cent of such advance tax as

reduced by the amount, if any, paid in the earlier install-ment.

On or before the 15th December Not less than seventy-five per cent of such advance tax as reduced by the amount or amounts, if any, paid in the earlier installment or installments.

On or before the 15th March The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier install-ment or installments

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In Tally.ERP 9, you can make FBT payments using FBT helper facility and generate FBT Challan ITNS 283 with the appropriate type of payment i.e, Advance Tax, Self Assessment Tax or Tax on Regular Assessment.

2.6.1 Advance FBT PaymentWhen an advance payment is made towards FBT, the same is reflected in the FBT computation report so that you make the balance payment.

Example 8:On 2nd June 2008, M/s Coromandel Industries paid an advance of Rs.500/- vide Ch. No. 015621.

Create Payment Entry Set up: In F12: Configure (Payment Configuration)

Ensure Use Single Entry Mode for Pymt/Rcpt/Contra to Yes Go to Gateway of Tally > Accounting Vouchers > F5: Payment Voucher

1. Press F2 and change the date to 02-06-20082. Select HDFC Bank in the Account field3. Select FBT Payable Ledger in the Particulars column 4. Type 500 in the Amount field5. Set FBT Details as Yes

Due Date of Installment Amount PayableOn or before the 15th September Not less than thirty per cent of such advance tax.On or before the 15th December Not less than sixty per cent of such advance tax as

reduced by the amount, if any, paid in the earlier install-ment.

On or before the 15th March The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier install-ment or installments.

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Figure 1.30 Enabling FBT Details

The FBT Payment Details screen is displayed as shown

Figure 1.31 FBT Payment Details Screen

6. In Type of Payment field select Advance Tax (100) from Type of Payment7. In From and To Date fields enter 01-04-2008 and 02-06-2008 respectively

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8. Enter the Challan Details (i.e., the Bank Challan No., Challan Date, Cheque/DD No., Bank Name and BSR Code) as shown.

Figure 1.32 FBT Payment Details

9. Type the cheque details in the Narration field

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Transactions


Figure 1.33 Completed Advance Payment Voucher


FBT Computation ReportGo to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT Computation

Press F2: Period and change the period to 1-4-2008 to 30-6-2008In F12: Configure Set Show Expenses Details to Yes, to display the expense details Set Tax Details to Yes, to display the tax details Set Show FBT Payment Details to Yes, to display payment details

Figure 1.34 F12: Configure

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The FBT Computation report is displayed along with the payment details, and the net payable amount is ascertained, as shown.

Figure 1.35 FBT Computation Report showing Advance Payment details

2.6.2 Quarterly FBT Payment

Example 9:On 15th June, 2008 M/s. Coramandel Industries paid Rs. 41,872/- towards FBT for the quarter ended 30th June, 2008 vide Ch. No. 015622.

Step 1: Create Payment Entry

Go to Gateway of Tally > Accounting Vouchers > Press F5: Payment Voucher

1. Press F2 and change the date to 15-06-20082. Press Alt+F for FBT Helper

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Transactions

In the FBT Payment details screen,

Figure 1.36 FBT Helper

3. Select Advance Tax (100) in the Type of Payment field. The Type of Payment selected in this field will be marked (checked) in the challan. If tax is paid on self assessment or regular assessment at the end of the year, the appropriate option is required to be selected

4. In FBT Ledger field select FBT Payable from the List of FBT Ledgers.5. In the From date field enter the date as 1-4-20086. In the To date field enter the date as 30-6-2008

The Alt + F: FBT Helper button will be dispalyed only when the Payment voucher is in Single Entry Mode.

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7. Enter the Challan Details, i.e., the Bank Challan No., Challan Date, Cheque/DD No., Bank Name and BSR Code, as shown.

Figure 1.37 FBT Filters

8. Press Enter to accept9. The FBT Payable amount is automatically prefilled as 41,827 in the Amount field10. Select HDFC Bank in the Account field11. Enter the cheque details in the Narration field.

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Figure 1.38 FBT Payment Voucher


Step 2: Generate FBT Challan13. Press Page Up to go back to payment voucher entry14. Press Alt + P to print ITNS 283 Challan15. In the Voucher Printing screen

Ensure Print as FBT Challan field is set to Yes

Tally.ERP 9 allows you to pass the FBT payment entry in the double entry mode also.

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The Voucher Printing screen is displayed as shown.

Figure 1.39 FBT Challan Printing Configuration

Ensure Alt + I: With Preview button is selected to view the print preview of the FBT Chal-lan.Press Enter from Voucher Printing screen to view the print preview of FBT Challan

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The Print Preview of FBT Challan - ITNS 283 is displayed as shown

Figure 1.40 Print Preview of FBT Challan – ITNS 283

16. In the Print Preview screen, press Alt + P to Print.

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2.6.3 Payment of Interest & PenaltiesIn the event of failure to pay advance tax for any quarter or any payment made less than the pre-scribed rate of 30% of the value of fringe benefits, interest @ 1% on the shortfall will be levied for each or part of the month for which such shortfall continues.

In Tally.ERP 9, interest and penalties can be accounted for in the following manner.

Example 10:Assume that a payment of Rs. 500/- was delayed on self-assessment and interest of Rs. 10 was payable on the same. Create Interest/ Penalty Ledger

Create a Payment Entry

Setup:In F12: Configure (Payment Voucher)

Set Use Single Entry mode for Pymt/Rcpt/Contra to No

Go to Gateway of Tally > Accounting Vouchers > F5: Payment Voucher

1. Press F2 and change the date to 31-03-20092. Select FBT Payable in the Debit field3. Specify the amount as 500 in the Debit column4. Select the Interest ledger in the debit field

In the Payment Type selection screen, select the appropriate Payment Type i.e., Interest

Ledger Under Inventory Val-ues are affected

Use for Assessable Value Calculation

Is FBT applicable?

Interest Indirect Expenses

No No No

Interest and Penalties are generally charged off to the Profit & Loss A/c during the same financial year. Hence, the same is created under Indirect Expenses group.

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Figure 1.41 Payment Type Selection

5. Specify the amount as 10 in the Debit column6. Select HDFC Bank in the Credit field and amount is defaulted automatically.7. Set Provide Details to Yes to view FBT Payment Details screen

Any ledger selected subsequent to the FBT ledger during voucher entry, will qualify for the Payment Type options subscreen and will appear in the appropriate box provided in the challan.

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The FBT Payment details screen is displayed as shown.

Figure 1.42 FBT Payment Details Screen

8. In Type of Payment field select Self-Assessment Tax (300) from the List of Type of Payment

9. In From and To date fileds enter the date as 1-4-2008 and 31-3-2009 respectively10. Enter the Challan details, as shown

Figure 1.43 FBT Payment & Challan Details

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11. Enter the cheque number in the Narration field and press EnterThe completed Payment Voucher is displayed as shown.

Figure 1.44 Interest Payment Voucher


The FBT Helper facility will not be available in the double entry mode. However, FBT details and period for which payment is made can be recorded, by setting FBT Details to Yes from the Voucher entry screen.

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Lesson 3: Reports

3.1 FBT ReportsTally.ERP 9 helps the assessee to generate the FBT Computation Report, FBT Challan, Statutory Returns and other related reports at the end of a month, quarter or year, as prescribed under the Act.

3.1.1 FBT Computation (Category wise) ReportThe FBT Computation Report displays the particulars of FBT categories of the transacted expenses ledger, total expenditure amount of fringe benefits, amount recovered if any and the net amount of fringe benefits. It also comments on the eligible percentage and the value of fringe benefits subject to FBT.

The FBT is computed at the prescribed rates for the given quarter or the required period after deducting advance tax paid (if any). The Surcharge, Education Cess and Higher Education Cess amounts are automatically calculated and included in the net tax payable amount.

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Reports

Go to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT ComputationPress Alt+F2 and change the period to 01-04-2008 to 30-06-2008 (Quarterly)


If required, you can also view the relevant section codes for the FBT Categories as prescribed in the statutes, by pressing F12: Configure and enabling Show Section Code to Yes.

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Reports

Tally.ERP 9 also allows you to view advance payments or any payments made in respect of Fringe benefits for the respective quarter/ period. The details can be viewed by configuring the report using F12: Configure option.

In F12: ConfigureSet Show Section Code to YesSet Show Expenses Details to YesSet Show Tax Details to YesSet Show FBT Payment Details to Yes

Figure 1.2 FBT Configuration Screen

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Reports

The FBT Computation Report is displayed as shown.

Figure 1.3 FBT Computation Report with Section Codes, Payment Details & Tax Details

In our case study (Coramandel Industries), the net tax payable is computed as Rs. 42,327 (inclu-sive of Educ. Cess & Higher Educ. Cess) for the quarter ended 30th June 2008.

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Reports

3.1.2 Ledgers of FBT Category ReportTally.ERP 9 allows you to drill down to FBT Ledger from the above FBT Computation Report.

Highlight the required FBT Category – Conference and press EnterPress F12:Configure and set Show Expenses Details and Show Tax Details to Yes

Figure 1.4 FBT Ledger display

The FBT Ledger displays the list of expenditure ledgers under the selected category, Expenditure Amount, Exempt Amount, Amount Recovered, Nett Expenditure, Value of Fringe Benefit, FBT, Education Cess, Secondary Education Cess and Total Tax. It reveals the ledgerwise FBT payable under the selected FBT category.

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Reports

You can further drill down to the Voucher level from the above report, by pressing Enter on the required ledger, for any kind of alteration

Figure 1.5 Ledger Vouchers

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Reports

3.2 FBT Statutory Returns3.2.1 ITR 8Go to Gateway of Tally > Display > Statutory Reports > FBT Reports > FBT Returns

Figure 1.6 FBT Return Print Configuration Screen

Press Enter to view print preview of Form ITR 8

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Reports

The Print Preview of ITR -8 is displayed as shown

Figure 1.7 ITR 8 - Page1

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Reports

Figure 1.8 ITR 8 - Page 2

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Reports


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