In the Finance Act, 2022 the government Introduced TDS on benefits and perquisites through section 194R. Before introducing section 194R many individuals receive income in form of benefit and perquisite from their respective organisations and they were not paying any tax on such income. Definitely there was Tax evasion. That’s why government introduced section 194R.
This section is applicable from 1st July 2022. The Amended Section Specified that a 10% TDS shall be deducted by any individual issuing any benefit or Perquisite (is in cash or kind) to a resident in a preceding year.
Section 194R is not applicable, if the value or aggregate value of benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed Rs.20,000/-
For Example: – Mr. Ram operates a trading business in the automobile industry that manufactures mobile, Laptop etc. And Ms. Priya runs a Consultancy Firm. Her firm is doing great work for Mr. Ram’s organization, Ram is happy with the work of Ms. Priya and he provides a Laptop of Rs 80,000 as a gift to her. Here, the gift of laptop worth Rs.80,000 is perquisite. Hence, Ram is required to deduct and pay TDS @ 10% on the Laptop (gift). TDS will amount Rs.8,000 and TDS report shall be submitted to Income Tax Department with in the specified time.
Tax shall not be deducted under this:-
- If the recipient is a non-resident,
- If an employer-employee relationship exists,
- If benefits or perquisites are provided to a customer who does not engage in business or exercise of a profession.
- If the benefits or perquisites do not have a connection with the business or profession of the resident recipient/deductee.
TDS on Benefits and Perquisites U/s 194R
| TDS to be deducted by | business or profession (resident or non-resident) |
| To be deducted on | any perquisite / benefit to a resident that arise out of business or profession |
| Type of advantage or Prerequisites | cash or kind or partly in cash and partly in kind |
| TDS | @ 10% |
| No TDS to be deducted if | value does not exceed Rs. 20,000 in a financial year |
| Not applicable for individuals or HUF if in the immediate preceding financial year | total sales do not exceed Rs. 1 Crore in case of business or 50 lakhs in case of profession |
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