TDS under section 194R of Income Tax Act 1961

TDS under section 194R of Income Tax Act 1961

It is a new section inserted with effect from 1st July 2022 through finance act, 2022.

– Rate of this section is 10%

– Applicable if value of perquisite or benefit provided to resident exceeds Rs. 20000/-

Type of advantage from Business owner or professional to resident in form of perquisite or benefit, whether in cash or kind, or partly cash or partly in kind, whether convertible or not in to money or not.

 

Following things are clarified:

  1. Though inserted on 1/7/2022 it is applicable from 1/4/2022. So amount of any benefit or perquisite paid after 1/7/2022 till 31/3/2023 is to be added with amount paid from 1/4/2022 to 30/6/2022. If total is crossing Rs 20000/- TDS is applicable U/S 194R
  2. If Person A pays amount more than Rs 20000/- to Person B , and Person B provides benefit/ Perquisite to Person C, then obligation to deduct TDS is on person A and not on person B
  3. Sec 194 R is applicable whether or not benefit/ Perquisite are taxable in hands of recipient.
  4. Benefit/ Prerequisite are valued at Fair Market value, except
    1. if provider has purchased and then provided to recipient then purchase price to provider
    2. if provider manufacturers the benefit/ Perquisite, then price charged to its customer
  5. GST is not to be included in valuation for the purpose of Sec 194 R.
  6. If recipient is receiving reimbursement for expenses invoiced in the name of provider, then provisions of sec 194R are not applicable. If reimbursement is made to recipient and expenses are not invoiced in the name of provider, then TDS under sec 194 R is applicable

In the following cases, TDS under section 194R is not applicable:

– If an employer-employee relationship is there, Perquisites under Salary Head given by a company to its Directors and Employees, like ESOPs, Cars, Rent Free Accommodations, Free Tours, LTCs, Mobiles, Performance Linked Incentives etc. as the tax shall be deducted under Section 192

– If the recipient is a non-resident, the tax shall be deducted under Section 195

– If the benefits or perquisites do not have a connection with the business or profession of the resident recipient/deductee

– If benefits or perquisites are provided to a customer who does not engage in business or exercise of a profession

– TDS under Section 194R of the Act on sales discount, cash discount and rebates allowed to customers