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Section 194R of the Income-tax Act of 1961
What is 194R TDS?
- In the Budget 2022 New section 194R, which was introduced by the central government would apply a 10% TDS (tax deducted at source) to benefits earned by professionals or businesspeople in the course of their profession or business beginning July 1.
- The person responsible for providing any benefit or perquisite to a resident is required to deduct TDS (tax deducted at source) under Section 194R. There is no need to check whether or not the amount is taxable in the recipient's hands or under which section it is taxable.
- The CBDT has issued guidelines for the application of Section 194R, which allows for tax deductions at source on advantages or perquisites received in the course of business.
CBDT Guidelines on applicability of TDS Provision U/s 194R
As previously mentioned, the CBDT released guidelines on the applicability of new TDS provisions to benefits obtained in the course of profession or a business. Now let's have a look at the clarifies/ Guidance given by the Income Tax Department.
- CBDT vs. Circular No. 12/2022, dated 16.06.2022, provided thorough instructions for resolving TDS issues under section 194R of the Income-tax Act, 1961. This Circular offers instructions for resolving issues with Section 194R, which takes effect on July 1, 2022. Section 194R requires a ten percent tax or TDS deduction on any benefit or perquisite supplied to a resident. The Guidelines for TDS on Perquisites under Section 194R are summarised in this article.
- The perquisites can be in cash or in kind, or a combination of the these forms.
- Income Taxpayer must check the taxability of the amount in the recipient's possession, and the type of the item provided as a benefit or requirement is irrelevant.
- Seller selling the capital assets given as advantages or perquisites are covered in the scope of under Section 194R.
- Section 194R of the Income-tax Act applies to merchants providing incentives, other than discounts or rebates, in cash or kind, such as cars, televisions, laptops, gold coins, mobile phones, sponsored trips, free tickets, and pharmaceutical samples to medical practitioners.
- CBDT confirmed that Section 194R would apply to the delivery of free samples to hospitals for doctors who are employed in hospitals and get free samples of medicines. As an employer, the hospital can classify such samples as taxable benefits for employees and deduct tax under Section 192. For such, the hospital's Threshold of 20,000 must be considered.
- For doctors who act as consultants for a hospital and receive free samples, TDS should be applied to the hospital first, which would necessitate deducting tax under section 194R on consultant doctors.
- The CBDT stated that, as an option to resolving the issue, the original benefit or perquisite provider may deduct tax directly from the consultant doctor as a receiver under Section 194R.
- CBDT has released guidelines to make the provisions of section 194R of the Income Tax Act easier to implement. To clarify the deduction of tax at source, the CBDT posed ten questions and provided answers. The income-tax authorities and the individual providing the benefit or perk are bound by the guidelines.
- According to the rules, it is not required for the payer or deductor to verify the taxability of the amount in the payee's hands prior to deducting TDS because the laws governing TDS under section 195 and TDS under section 194R are clearly differentiated.
- The benefit covered under section 194R could be in cash, in kind, or a combination of both. The assets provided are unrelated, and the capital assets provided as a benefit fall under section 194R. The Central Board of Direct Taxes (CBDT) issue any form of advantage in order to impose TDS liablity on the payer.
- The CBDT is a tax that allow consumers to get a break on sales discounts, cash discounts, and exemptions. Section 194R would apply to sellers who offer incentives in addition to the exemptions, such as cash or in the form of a car, television, computer, gold coin, mobile phone, sponsored trip, free ticket, or pharmaceutical samples to doctors.
- "The guidelines were provided on time, given that the section goes into force on July 1st, and they seek to provide clarity on numerous fronts." Certain features, such as the application of withholding tax on reimbursement of OPEs, benefits supplied to recipients who are not in business or profession, and so on, could raise a slew of practical issues for which taxpayers should prepare," said the tax expert from Rajput Jain and association.
CBDT has Issue guidelines to make provisions of section 194R of the Income Tax Act
