New Delhi :
The Central Board of Direct Taxes under the Income Tax
department has notified fresh guidelines in connection with
the applicability of a new TDS provision related 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 inserted 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.
“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,” said the CBDT in its notice dated
June 16, Thursday.
The new provision will come into effect on July 1, which is next
month.
The CBDT also said that the taxpayer is not required
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.
“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 notice also said.
The guidelines also mentioned 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 deducted 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.
“The
hospital may subsequently treat this benefit/perquisite as the perquisite given
to its employees (if the person who used 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 allowed as deduction as salary expenditure.
Thus, ultimately the amount would get taxed in the hands of the
employee and not in the hands of the hospital,” said the CBDT.
The CBDT has also provided 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 required to be made, if the value or
aggregate of value of the benefit or perquisite provided or likely to be
provided to the resident during the financial year does not exceed Rs 20,000,
the CBDT clarified.
Youthlegal July 4 2022
