Office Tax Procedures

Questions: 1. What is a fringe benefit and provide an example? 2. What criteria need to be satisfied for something to be deemed a fringe benefit? 3. Explain what general deductions for tax purposes are and provide at least 5 examples? Answers: (1). Fringe Benefit is a privilege or reward or advantage provided by an employer to his employees or labourers against which the employer has to pay taxes at the rates specified by Income Tax Authorities, Some of these benefits are exempted (Ball, 2015). Fringe benefits generally provided to employees for giving them non- cash allowances to provide them good and advantageous to both the provider and receiver under work culture so that they work more efficiently and effectively. Examples of such fringe benefits are House Rent Allowance, Rewards on achieving beyond the targeted goals, Provident Funds, Mediclaims, Education Claims, Travelling Allowances, Stock Options are several allowances provided by employers. (2). Criteria that is required to be satisfied for anything to be a deemed fringe benefit is there should be outflow of values material to the provider either in the form of cash or kind to the receiver. The receiver need to use the benefits in one calendar year otherwise those benefits provided gets lapsed ((Ball, 2015). (3). All the assesses are required to pay tax on their income as per the provisions laid under Income Tax Act in the year of assessment. Taxable income is derived by inclusion of all the incomes and gains deducted by expenses and losses and certain exempted incomes. These expenses and losses allowable for deductions are called general deductions (Gangl, Hofmann and Kirchler, 2015). These general deductions qualify for deductible only if they satisfy certain conditions as provided in the Act which are as follows: General deductions are allowed for assesses carrying business on trade and have been incurred in the generation of its income. Deductions can be claimed only for the expenses or losses actually incurred by the taxpayer either in the form of cash or in the value materially ascertainable. No deductions are allowed for losses or expenses in Capital or of Contingent nature, it has to be of Revenue nature. Expenses or losses are allowable as deductions only if they are incurred in the year of assessment i.e. any advance or outstanding payments does not qualify for general deductions. Examples of general deductions: Cost of productions Travelling expenses Audit expenses Accounting expenses Payments of rent Depreciation charges Loss on sale of assets. Reference List: Ball, T., 2015. International Tax Compliance Agreements and Swiss Bank Privacy Law: A Model Protecting a Principled History.Geo. Wash. Int'l L. Rev.,48, p.233. Dinis, A., Lopes, C. and Silva, A., 2015.Tax evasion and tax fraud in the bankruptcy process: empirical evidence from Portugal. OBEGEF-Observatrio de Economia e Gesto de Fraude. Gangl, K., Hofmann, E. and Kirchler, E., 2015. Tax authorities' interaction with taxpayers: A conception of compliance in social dilemmas by power and trust.New ideas in psychology,37, pp.13-23. Gangl, K., Kirchler, E., Lorenz, C. and Torgler, B., 2015. Wealthy Tax Non-Filers in a Developing Nation: The Roles of Taxpayer Knowledge, Perceived Corruption and Service Orientation in Pakistan.WU International Taxation Research Paper Series, (2015-26).