From July 1, 2022, the new guidelines on the applicability of the new TDS provision on benefits and perquisites received in a business or profession will come into force, the income tax department has announced in a notification.
The Central Board of Direct Taxes (CBDT) has also announced that the taxpayer needs to check on the taxability of the sum in the hands of the recipient, and that the provider of the benefit or the perquisite can directly deduct the tax under Section 194R.
The government had brought in a new section, 194R, in Budget 2022-23, requiring any person providing benefit or perquisite exceeding Rs. 20,000 in a year to a resident to deduct tax at source at 10 per cent where the recipient receives such perquisite from the business or the profession.
CBDT has, further clarified that the nature of asset given as benefit or perquisite will not be relevant for calculation, and that capital assets given as benefit or perquisites will be covered within the ambit of Section 194R, according to a report in Livemint.
CBDT has nevertheless clarified that it has provided a breather on sales discount, cash discount and rebates to customers, and excluded them from the purview of Section 194R. Accordingly, Section 194R will now apply to any seller giving incentives, other than discount or rebate, which are in cash or kind, for e.g., car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, or medicine samples to medical practitioners.
According to the CBDT, Section 194R will also apply on doctors employed in a hospital if they are receiving free samples of medicines. In such cases, the hospital, as an employer could consider such free samples as taxable perquisite for employed doctors, and accordingly deduct tax.
But for doctors working as consultants with a hospital who are receiving free samples, the TDS would first apply on the hospital, which can then deduct tax from the consultant doctors, the report added.
Apparently, Section 194R will also apply where the benefit or perquisite is provided to a government entity, such as a government hospital, not carrying on business or profession.
