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NEW TDS PROVISION SEC 194R. ALL THERE IS TO KNOW

Updated: Nov 10, 2022



Section 194R, which relates to the deduction of tax on benefits or perquisites in relation of enterprises or professions, was added by the Finance Act of 2022.


Businesses, companies, corporations, or entities frequently offer a variety of perks and incentives to its distributors, channel partners, agents, or dealers in order to encourage and incentivize them to support continued business growth. Travel packages, gift cards or vouchers, items offered as part of incentive programmes, or even the use of business assets are a few examples.


The government has levied 10% tax deducted at source (TDS) on the freebies received by social media influencers and doctors for sales promotions w.e.f 1st July, 2022.


How are social media influencers impacted?

If social media influencers retain the product, it will be treated as a "benefit" and tax is required to be deducted accordingly u/s 194R of the Finance Act, 2022. On the other hand, if the product is returned after a promotion, TDS is not to be paid.


How are doctors impacted?

If doctors provide free samples of medications while working for a hospital, Section 194R would be applicable. As an employer, the hospital must recognise these samples as taxable perquisites for its employees and withhold tax in accordance with Section 192.


RELIEF OFFERED

Sales discounts, cash discounts and rebates allowed to customers are excluded from the purview of Section 194R and thus, customers don’t have to pay the TDS on the same.


Section 194R will not apply if the benefit or perquisite is provided to a government entity, like government hospital, not carrying on business or profession.


THRESHOLD LIMIT

The threshold limit is ₹20,000 in a financial year.


NON APPLICABILITY

a) In case of Business- Individual or HUF, whose total sales or turnover does not exceed Rs. 1 Crore

b) In case of Profession- Gross receipts does not exceed Rs. 50 lakhs,


during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided.


YKG Corp.

CA Mukul Gupta

+919910220566

info@ykgcorp.com


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