TDS under section 194R

TDS under section 194R

CBDT ISSUES NEW GUIDELINES ON TDS UNDER SECTION 194R

Union Budget 2022, a new TDS section 194R, has been proposed in the Finance Bill 2022, w.e.f. 01.07.2022.

This new section 194R requires deduction of tax at source @ 10%, by any person, providing any benefit or perquisite, exceeding Rs. 20,000 in value, in a year, to a resident, arising from the business or profession of such resident and such benefit or perquisite is in the nature of income falling under section 28(iv) of the Income tax Act.

The benefit or perquisite referred to in this new section 194R is not the perquisite u/s 17(2), under the head salary income, paid or payable by the employer to employees, as for that perquisite u/s 17(2), another TDS section 192 is already there.

The benefits or perquisites proposed to be covered by this new section 194R are those perks, benefits, amenities, or facilities, probably in kind, or in a combination of cash and kind, which a resident person enjoys, pursuant to,

or in exercise of his business or profession, in lieu of the regular consideration payable to him, in monetary terms, in exercise of such business or profession. Such benefits or perquisites are taxable as business receipts u/s 28(iv) of the Income Tax Act

Sec 28 : The following income shall be chargeable to income-tax under the head “Profits and gains of business or profession”,

(iv): the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession.

Purpose for Introducing of Sec 194R:

It was observed by department that many companies claimed expenses for business promotions by offering various gifts/ perks/ benefits to its dealers (on fulfillments of conditions of under agreement or as per prevalent norms/ tradition practice followed by over the years by business entity) under section 37 of Income Tax Act 1961,

however majority of dealer did not declared the said gifts/ perks/ benefits under business income as required by sec 28 (iv) of Income Tax Act 1961. So to bring such gifts/ perks/ benefits received due to business connections by resident dealers TDS U/s 194R is introduced to track the undeclared income.

CBDT Issues Guidelines on TDS applicability on Non-salary prequisites:

The Central Board of Direct Taxes (CBDT)  issued guidelines seeking to address likely issues emanating from application of the newly introduced section 194R of the Income Tax Act for withholding 10% tax (TDS) on benefits or perquisites from non-salary sources.

The new provision part of the Finance Act 2022 will become effective from July 1.

According to the guidelines, it is not necessary for the payer/deductor to check the taxability of the sum in the hands of the payee before deducting TDS by clearly distinguishing the principles governing TDS under Section 195 from the TDS under Section 194R.

It is made clear that the benefit or perquisite covered under Section 194R can be either in cash or in kind or partly in cash and partly in kind.

The nature of asset given as benefit or perquisite is not relevant and even capital assets given as benefit or perquisite are covered within the scope of Section 194R. CBDT categorically uses the phrase ‘of whatever nature’ on benefit or perquisite for fastening TDS liability on the payer.

However, CBDT has provided a breather on sales discount, cash discount and rebates allowed to customer by excluding them from the purview of Section 194R as their inclusion would put the seller into difficulties.

Section 194R will apply to seller giving incentives, other than discount or rebate, which are in cash or kind e.g., car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, medicine samples to medical practitioners.

“The guidelines have been issued in time considering the section is effective from 1st July and seeks to provide clarity on multiple fronts.

Certain aspects, particularly applicability of withholding tax on reimbursement of OPE’s, benefits provided in cases of recipient not engaged in business or profession etc.

Don't forget to share this article :-

Stay Updated With Our Blogs!

Explore more of our blogs to have better clarity and understanding
of the latest corporate & business updates.

Why People Choose Our Services ?

Free Legal Advice

We provide free of cost consultation and legal advice to our clients.

Tech Driven Platform

All our services are online no need you to travel from your place to get our services.

Grow your business

Experts Team

We are a team of more than 15+ professionals with 11 years of experience.

Transparent pricing

There are no hidden & extra charges* other than the quote/invoice we provide.

100 % Client Satisfaction

We aim that all our customers are fully satisfied with our services.

On-Time Delivery

We value your time and we promise all our services are delivered on time.

Why Trust legal Suvidha?

People Who loved our services and what they feel.

In this Journey of the past 10+ years, we had gained the trust of many startups, businesses, and professionals in India and stand with a 4.9/5 rating in google reviews.

Rajesh Srivastava
Rajesh Srivastava
Startup CEO
Read More
Great services and expertise. Highly recommended, Quick work and provided good support for the entire process. Made things very easier for us and I got my first ever Trademark for my product in just no time. I recommend their services to all the Startups for a hassle-free registration and other services. Again Thank You So Much Team Legal Suvidha... Good work...
Vijaya
Vijaya
Employee
Read More
Excellent service and has been very timely in response. They are very patient too and guided us with the right steps even though we approached them with very few days left before the deadline. I highly recommend them to other startups who need legal advice and do all the paperwork at the year-end. And we would approach them for all our future requirements as well.
Krish Mundarath
Krish Mundarath
Businessman
Read More
We highly recommend them. Best in class services. Thank you for helping me through the process and for prompt replies. All the Best in your Endeavors. We highly recommend them. Best in class services. Thank you for helping me through the process and for prompt replies. All the Best in your Endeavors. I will surely consider them for future work.
Inamul Hashmi
Inamul Hashmi
Businessman
Read More
Legal Suvidha filed my GST, Income Tax Returns for my business Happy by their service. They are Excellent, cost effective, efficient, co-operative & Genuine service providers keep up the good work in the future. Thank you for shaping my business in the right direction. I would suggest others to take up their services they are better than other competitions present in the market.
Previous
Next

Our Partnerships & Collaborations

Contact us and grow your business

Legal Suvidha App

Now all Professional Services in a Single Click !

Now get all the services required for your business in a single app.

Subscribe to our newsletter & grow your business

Subscribe To Our Newsletter .

Sign up to receive email updates on new product announcements, special promotions, sales & more.