TDS on Benefit or Perquisite in Respect of Business or Profession (Section 194R)
[As per Circular No. 12 of 2022]
Need to Introduce Section 194R
• As per Section 28(iv), the value of any perquisite or benefit arising from business or profession is to be charged as business income in the hands of recipients.
• However, in many cases, the recipient does not report the receipt of such benefits in their Income Tax Return (ITR).
• Accordingly, in order to widen and deepen the tax base, it is proposed to insert new Section 194R.
For more info watch this video – New TDS Provision TDS on Benefit and Perquisite Under Section 194R
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TDS on Benefit in Respect of Business or Profession – Section 194R
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• Who will deduct TDS (Deductor) –
Individual/HUF whose sale ≥ Rs.1 crore (business) or ≥50 lacs (profession) in preceding FY.
Any other person
• Who will be deducting TDS (Deductee):
Any Person who is a Resident in India
• Effective Date: W.e.f. 1st July 2022
• Threshold Limit – Rs.20,000 (Calculated from 1.4.2022)
TDS will be deducted on the whole benefit/perquisite provided on or after 1.7.2022
• Rate of TDS: 10%
• Eligible Transaction for TDS – Any Benefit or perquisite arising from Business or exercise of profession
• Whether convertible into money or not.
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| Nature of Transaction | TDS Deducted or Not |
|---|---|
| Principal Loan waived by Bank under one time settlement | Yes |
| Rent free accommodation, furniture and fixture given to director | Yes |
| Seller offer 2 items free with purchase of 10 items whether TDS applicable on 2 free items | No |
| Incentive provided in the form of cash or in kind | Yes |
| Person sponsor trip for recipient or/and his relative | Yes |
| Free tickets for an event | Yes |
| Free Medicine sample to doctors and hospital | Yes |
| Provide education to dealers about the product | No |
| Provide education to selected dealers who achieved the particular target | Yes |
| Expenses incurred to leisure trip even if it is incidental to Dealer conference | Yes |
| Expenditure incurred on family member accompanying the person who attend the dealer conference | Yes |
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Conclusion
Section 194R is a vital step by the Income Tax Department to ensure businesses and professionals do not escape tax liability on non-monetary benefits. Understanding its provisions is essential for effective tax compliance and smooth business operations.
Why Choose E Accountax Manager?
At E Accountax Manager, we simplify complex tax laws for you. Whether it’s accurate income tax return filing or expert Virtual CFO services in Jaipur, our experienced team ensures compliance, timely submissions, and strategic financial guidance to grow your business. Trust us for transparent, professional, and reliable service.
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