Central Board of Direct Taxes under the Income Tax department has notified fresh guidelines in connection with the applicability of a new TDS provision relate to receiving benefits in a business or profession.
The tax board said that these perquisites may either be in cash, in kind or partly in both of these two means.
Finance Act 2022 insert a new section 194R in the Income-tax Act, 1961, which was notified during the Budget speech of finance minister Nirmala Sitharaman earlier this year.
CBDT in its notice date 16th June 16 2022 :
“The new section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source at 10 per cent of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite,”.
The new provision will come into effect on 1st July 2022, which is next month
The CBDT also said that the taxpayer is not require to check whether the amount of benefit or perquisite that he is providing would be taxable in the hands of the recipient under clause (iv) of section 28 of the Finance Act 2022.
CBDT Said :
“There is no further requirement to check whether the amount is taxable in the hands of the recipient or under which section it is taxable,”.
The guidelines also mention that Section 194R shall apply to seller giving incentives, apart from rebates or discounts, which include items in cash or kind.
Some of these are car, TV, computers, gold coin, mobile phones, sponsored trips to family, free tickets and free medical samples.
The CBDT further said that the Section 194R will be applicable on distribution of free samples to by a company to a doctor who is an employee of a hospital.
The tax will be deduct by the company in the hands of hospital as the benefit/perquisite is provided to the doctor on account of him being the employee of the hospital.
CBDT Said :
“The hospital may subsequently treat this benefit/perquisite as the perquisite given to its employees (if the person who use it is his employee) under section 17 of the Act and deduct tax under section 192 of the Act. In such a case it would be first taxable in the hands of the hospital and then allow as deduction as salary expenditure. Thus, ultimately the amount would get tax in the hands of the employee and not in the hands of the hospital,”.
The CBDT has also provide relaxations on sales discount, cash discount and rebates given to customers from the ambit of the new Section 194R as the inclusion would put sellers into difficulties.
This deduction is not require to be made, if the value or aggregate of value of the benefit or perquisite provide or likely to be provide to the resident during the financial year does not exceed Rs 20,000, the CBDT clarified.
