Section 194R - TDS on benefit or perquisite in respect of business or profession - Income Tax - Ready Reckoner - Income Tax

TDS on benefit or perquisite in respect of business or profession - Section 194R The section 194R has been inserted with effect from 01.07.2022 Applicability - Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite. In a case where the benefit or perquisite, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite. [ First Proviso to section 194R ] Rate of TDS : 10% of the value or aggregate of value of such benefit or perquisite. Exception of section 194R :- Provision of section 194R not apply in certain cases: In case of a resident where the value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed ₹ 20,000 . [ Second Proviso to section 194(R)(1) ] A person being an individual or a Hindu undivided family , whose total sales, gross receipts or turnover does not exceed ₹ 1 crore in case of business or ₹ 50 lakhs in case of profession , during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person. [ Third Proviso to Section 194R(1) ] [Explanation inserted vide FA, 2023 , For the removal of doubts, it is clarified that the provisions of section 194R(1) shall apply to any benefit or perquisite, whether in cash or in kind or partly in cash and partly in kind.] Important Clarification given by the CBDT vide Circular no. 12/2022 dated 16.06.2022 and circular no. 18/2022 dated 13.09.2022, the following clarification are given by the board pertaining to section 194R. It does not impact the taxability of income in the hands of recipient which shall be governed by the relevant provisions of the act. Person providing benefit or perquisite needs to check if the amount is taxable under clause (iv) of section 28 ? Benefit or perquisite must be in kind? Requirement to deduct tax under section 194R of the Act, when the benefit or perquisite is in the form of capital asset? Whether sales discount, cash discount and rebates are benefit or perquisite? Valuation of benefit/perquisite required to be carried out? Reimbursement of out of pocket expense incurred by service provider in the course of rendering service is benefit/perquisite? Dealer conference to educate the dealers about the products of the company - Is it benefit/perquisite? Responsible person is required to ensure that tax required to be deducted has been paid in respect of the benefit or perquisite, before releasing the benefit or perquisite? If loan settlement/waiver by a bank is to be treated as benefit/perquisite? if service provider incurs an expense as pure agent such reimbursement treated as benefit/perquisite? Embassy/High Commissions are required to deduct tax under section 194R of the Act? Issuance of bonus share/right share is a benefit or perquisite if issued by a company.