What is a flexible benefit plan in a salary breakup? Would it be definitely included in the salary, or is it a variable pay, like bonuses, which depend on the performance of the individual, team and/or the company?
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Objective of Flexible benefit plan is to save tax. It generally includes food coupons, telephone bills & some reimbursement such as fuel bills etc.
Let’s take an example : Employer offers flexible benefit of 60000 to an employee. Employee can either decline this benefit & ask employee to credit this amount in salary as TAXABLE INCOME.
Employee can opt for flexible benefit. In that case employee will not receive this amount (60000) in his salary unless he submits bills for this amount for reimbursement.
I have personally never opted for flexible benefit option because of hassle of keeping all the bills.
Hope it helps !!
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To put this in simple words, in a flexible benefit plan :
- In your total Compensation package, you will firstly get a fixed Basic Pay. Also, there may be a definite performance-linked component.
- For the balance amount, you get the option to choose the other flexible components to total up your final compensation package.
- You can also choose the amount allocation under each flexible component.
- Amounts under flexible components can be availed only by way of reimbursements against production of bills/ receipts. Some of the flexible components are:
- House Rent Allowance (HRA)
- Local Conveyance Expenses (including fuel viz. Petrol/ Diesel/ CNG),
- Leave Travel Allowance (LTA)
- Medical Expenses
- Newspaper, Magazines & Professional Journals
- Mobile/ Telephone Reimbursement
Please importantly note the following :
- These flexible components give a good income-tax benefit.
- You must be fully aware of the various Income Tax Sections which provide for Tax reliefs.
- Also, you must be painstaking enough to obtain and keep on file to submit the original bills/ receipts of the amounts spent under flexible components to your employer.
- Then only you will be able to avail best benefits ftom the Flexible benefit plan.
- In absence of bills/ receipts, you will end up paying Income Tax.
The flexi-basket in most companies is used to provide employees with tax benefits.
So, if you provide proofs for them, you will get the money as tax-free. However, if you do not provide proofs, the money will be taxable. Usually, if you fail to provide proofs throughout the year, then this entire money will be paid out to you at the end of the year after suitable tax deduction. Don’t worry they won’t withhold the money 🙂
Flexible benefit plan is a basket of tax friendly components. Normally there is a standard set of heads like basic, hra, conveyance. There are others where one can claim tax benefit within certain limits and one can choose these based on individual needs. Eg: professional development, newspaper, etc. The amount under the Flexible benefits basket is already part of the CTC.
This in not variable pay.
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A flexible benefit plan or fbp is a component of your salary. It is generally used to save tax. It includes sodexo or Accor food coupons, LTA, special reimbursements etc. A person must use them to save tax. Always consult your payroll person for making best of it.
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Flexi basket salary salary can be either a benefit or allowance.
If its an allowance like petrol allowance, mobile allowance etc. then you need not show any proofs for it and the same will be paid out along with your basic salary. These allowances might be taxed.
On the other hand, if its a benefit like mobile benefit or petrol/ driver benefit, then you indeed need to show proofs of expenditure before you can avail the benefits (as applicable in the it act). these are generally tax free, if appropriate proofs have been showed.
Please ask your HR to clarify what type of component is this.
Flexible benefit plans allow employees to choose the benefits they want or need from a package of programs offered by an employer. Flexible benefit plans may include health insurance, pension plans and reimbursement accounts that employees can use to pay for out-of-pocket health or dependent care expenses.
In a flexible benefit plan, employees contribute to the cost of these benefits through a payroll deduction of their before-tax income, reducing the employer’s contribution. In addition, the ability to pay for benefits with pre-tax income lowers an employee’s taxable income while raising the amount of their take-home pay—an added “benefit.” In the short term, companies obviously benefit from sharing costs with employees. But a business may also choose to cap its future contributions to benefits by passing along increased costs to employees through these plans.
Flexi Benefit Plan – FBP is something which allows you to compute your own salary other than Basic.
Usually companies now gives you a basic salary and remaining as FBP, where you can maximize your take home. Generally you can take HRA, Conveyance Allowance, Medical, LTA and Special Allowance.
Flexible benefit plan means you Can get Tax exemption on under the Salaried Income apart from IT.
Car Maintenance Expense
Mobile bills Expense
Meal Coupon as food expense
Flexible benefit plans may include health insurance, retirement benefits such as 401(k) plans, and reimbursement accounts that employees can use to pay for out-of-pocket health or dependent care expenses.
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