Section 194R TDS on Benefits or Perquisite w.e.f. 01.07.2022

This is to inform you that a new section 194R is  applicable w.e.f. 01.07.2022 under Income Tax Act, 1961.

1. Section: 194R

2. TDS Rate: 10% of benefit or perquisite provided to resident

(Threshold Limit of 20,000/- shall be counted from 01.04.2022 but tax deducted w.e.f. 01.07.2022)

3. Who will deduct TDS:

♦ The person responsible for providing the benefits or perquisite to resident.

♦ The responsibility for tax deduction also does not apply to a person, being individual/Hindu undivided family (HUF) deductor, whose total sales/ gross receipts/ gross turnover from business does not exceed Rs. 1 crore , or from profession does not exceed Rs. 50 lakh , during the financial year immediately preceding the financial year in which such benefit or perquisite is provided by him.

4.Conditions: TDS shall be deducted only –

• When benefit or perquisite provided to a resident. Resident means a person who is resident in India.
• When the value of benefit or perquisite exceeds or likely to exceeds Rs. 20,000/- in a FY.

5. Benefit or Perquisite means and includes:

• Benefits or Perquisite in kind or party in kind and party in cash.
• Out of pocket expenses
• Free Samples
• Seller provides relaxation:
  • When a person gives incentives (other than discount, rebate) in the form of cash or kind such as car, TV, computers, gold coin, mobile phone etc.
  • When a person sponsors a trip for the recipient and his/her relatives upon achieving certain target.
  • When a person provides free ticket for an even.
  • When a person gives medicine samples free to medical practitioners.
• Products provided to Social Media Influencer like brand ambassador etc. and retained by him.
• Expenditure incurred for dealer conference to educate the dealer for specified expenditure. (Refer the point no. 8 of circular 12/2022 dated 16.06.2022)

6. Benefit or Perquisite does not include:

• Sales discount, Cash discount and Rebates allowed to customers.
• Item supplied free of cost with the sale of another product like the seller offers two items free with purchase of 10 items.

7. Special Note:

• Out of Pocket Expenses Reimbursed: TDS shall be deducted on the expenses reimbursed for the invoices only which is not in the name of the person ultimately receiving the services.
• In case the benefit or perquisite in kind or partly in kind, recipient shall pay tax in the form of advance tax and deductor shall obtain declaration and copy of challan for amount deposited by recipient of benefits.
• In my view, Section 194 shall not be applicable where employer provides any benefits or perquisites provided to employee(s) as he is not carrying any business or profession.

The above is personal view of the author. The author is not responsible for any loss caused to person by relying on the above view.