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194R- TDS on Benefits/Perquisite
In the Finance Act 2022, a new TDS section 194R, has been inserted in the Income Tax Act and Which has been made applicable with effect from 1.7.2022.
Applicability: Any person(Resident/Non resident) responsible for providing any benefit or perquisite whether convertible into money or not, to a resident.
Points to remember
Benefits/Perquisites should arise either from business/Profession by such resident
payee.
Perquisite may be in cash, kind or partly in the form of both.
TDS Rate- 10%
Threshold Limit- Rs.20,000/Year.
Deductor is under no obligation to check whether the benefit/perquisite provided is taxable as business income for the recipient or not.
FAQs on 194R
1. Whether 194R applicable on benefit/perquisite provided to Non resident?
A: No, Only Resident Payee is covered u/s 194R
2. Whether required to take into consideration the transactions entered before 1.07.2022?
A: Yes, It will be considered for determining the threshold limit of Rs.20,000/- but,TDS u/s 194R not required to deduct on transactions entered before 01.07.2022.
3. TDS u/s 194R is to be deducted on which amount?
A: TDS u/s 194R is to be deducted on fair market value of the benefit or perquisite.
However, if deductor has purchased the benefit/perquisite before providing it to the recipient, TDS shall be deducted on the purchase price.
If the deductor manufactures such item, then the price that it charges to its customers for such item shall be the value for such benefit / perquisite.
Note: GST to be excluded.
4. Whether an individual is required deduct TDS u/s 194R?
A: whose total sales/ gross receipts/ gross turnover from business exceeds one crore rupees, or from profession exceeds fifty lakh rupees, during immediately preceding the financial year is required to deduct TDS u/s 194R.
5. How report 194R transaction in TDS return?
A: 194R transactions shall be reported in Form 26Q. This year 26Q has included provisions for reporting such transactions.
Some Practical Instances
| Sl No | Nature of Benefits/Perquisite | Applicability |
| 1 | Whether benefit to employee covered | No , Because 194R covers only those receipts arising out of business/profession by the recipient |
| 2 | Whether Capital Asset covered | Capital assets like car, land etc. given as benefit or perquisite would be covered within the ambit of deduction of TDS u/s 194R |
| 3 | Sale discount, Cash discount | No TDS u/s 194R |
| 4 | Seller incentive | Section 194R shall apply to sellers giving incentives, other than discounts or rebates, which are in cash or kind e.g., car, TV, sponsored trips, free tickets, medicine samples to medical practitioners. Samples to customers(Carrying business/Profession) |
| 5 | Gift to supplier | Yes, Because gift is received by the supplier as a result of doing business/Profession |
| 6 | Free samples | Section 194R shall apply on provide free sample in the course of business/ profession |
| 7 | Samples to hospitals for doctors( Doctors working as an employee) | Transaction-1 : Samples to Hospitals – TDS required to be deducted u/s 194R Transactions-2: Free sample distribution by hospital to doctors – Not required to be deducted since doctor is an employee |
| 8 | Samples to hospitals for doctors( Doctors working as a consultant | Transaction-1 : Samples to Hospitals – TDS required to be deducted u/s 194R Transactions-2: Free sample distribution by hospital to doctors – TDS required to be deducted u/s 194R |
| 9 | Product given for a review | No TDS u/s 194R since the product will be returned after review. |
| 10 | If the benefit is in kind or partly in kind(Cash is not sufficient for TDS deduction) | Deductor is required to ensure that tax required to be deducted has been paid to gvt in respect of the benefit before releasing the benefit in kind. |
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