Section 194r of income tax act

Scope and coverage of Section 194R • Deductor is not required to check whether the benefit or perquisite is taxable in hands of the recipient under any of the provisions of the Income Tax Act. • No requirement to check whether the amount itself is taxable or not • • Wholly in cash • Wholly in kind • Partly in cash and partly in kind • Benefit or perquisite can also be in the form of providing a capital asset (for example, car, land, etc.) Sales discounts, cash discounts, and rebates • Sales discount, cash, discounts, and rebates allowed to customers from the listed retail price represents a lesser realisation of the sale price itself. To that extent, the purchase price is also reduced. Logically, these are benefits but in order to remove the potential difficulty for the seller, no TDS is required to be deducted on sales discounts, cash discounts, or rebates allowed to customers. • Freebies provided on purchases of some items, (for example, one item free on purchase of four items) are not to be subjected to Section 194R • However, Section 194R applies here: • When a person gives incentives (other than discount, rebate) in the form of cash or kind such as a car, television, computer, gold coin, mobile phone, etc. • Sponsoring a trip for the recipient and his/her relatives, upon achieving certain targets • Providing a free ticket for an event • Providing free medical samples to doctors Valuation of perquisite or benefits The valuation would be the fair market price (FMV) of b...

Mukesh Kohli – [2022] 139 taxmann.com 422 (Article) The Finance Act, 2022 inserted a new section The new section mandates a person, who is responsible for providing any benefit or perquisite to deduct tax at source @10% of the value of aggregate of value of such benefit or perquisite. The benefit or perquisite may or may note be convertible into money but should arise either for carrying out of business, or from exersing a profession, by such resident. The Central Board of Direct Taxes brought guidelines for removal of difficulties under sub-section (2) of section 194R of the Income Tax Act, 1961 on 16/06/2022 vide circular No. 12 of 2022. There are certain points where the CBDT has given guidelines which are contrary to the decision of Apex Court. Circulars or instructions do bind the department and its officer but they do not bind the court in interpretation of statutory provisions. Circulars issued by Govt. department cannot have any primacy over the decision of jurisdictional High Court. Circulars and instruction issued cannot survive if these are contrary to the decision of a constitutional court. Circulars or instruction given by the department are no doubt binding on the authorities under the Act but when the Supreme Court or the High Court has declared the law on the question arising for consideration, it will not be open to contend that circular should be given effect and not the view expressed in the decision of the supreme court or the high court. There are foll...

1. As per clause (iv) of section 28 of the Act, the value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession is to be charged as business income in the hands of the recipient of such benefit or perquisite. However, in many cases, such recipient does not report the receipt of benefits in their return of income, leading to furnishing of incorrect particulars of income. 2. Accordingly, in order to widen and deepen the tax base, it is proposed to insert a new section 194R to the Act to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite. For the purpose of this section, the expression ‘person responsible for providing’ has been proposed to mean a person providing such benefit or perquisite or in case of a company, the company itself including the principal officer thereof. 2.1 Further, in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of...

The Central Board of Direct Taxes (CBDT) on Thursday issued guidelines seeking to address likely issues emanating from application of the newly introduced section 194R of the Income Tax Act for withholding 10% tax (TDS) on benefits or perquisites from non-salary sources. The new provision part of the Finance Act 2022 will become effective from July 1. Income Tax: Employee incentive is part of taxable salary and fully taxable It is made clear that the benefit or perquisite covered under Section 194R can be either in cash or in kind or partly in cash and partly in kind. The nature of asset given as benefit or perquisite is not relevant and even capital assets given as benefit or perquisite are covered within the scope of Section 194R. CBDT categorically uses the phrase ‘of whatever nature’ on benefit or perquisite for fastening TDS liability on the payer. However, CBDT has provided a breather on sales discount, cash discount and rebates allowed to customer by excluding them from the purview of Section 194R as their inclusion would put the seller into difficulties. Section 194R will apply to seller giving incentives, other than discount or rebate, which are in cash or kind e.g., car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, medicine samples to medical practitioners. “The guidelines have been issued in time considering the section is effective from 1 July and seeks to provide clarity on multiple fronts. Certain aspects, particularly applicability of...

Applicability of Section 194R of Income Tax Act, 1961 : -Any person responsible for providing to a resident -any benefit or perquisite -whether convertible into money or not -arising from business or profession by such resident -shall deduct TDS. Explanation: Person responsible for providing means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof. Applicable w.e.f. : 1 st July, 2022. Rate of TDS : 10% of the value or aggregate of value of such benefit or perquisite. Comment: The benefit or perquisite which has been provided on or before 30 th June 2022, would not be subject to tax deduction under Section 194R of the Act. Threshold limit (from recipient’s perspective) : The provisions of this Section shall not apply in case of a resident where the value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the F.Y. does not exceed ₹20,000. Comment: The threshold limit of ₹20,000 shall be counted from 1 st April, 2022 onwards. Time of deduction : Before providing any benefit or perquisite. Non-applicability (from deductor’s perspective) : The provisions of this Section shall not apply to a person being an individual or HUF, whose total sales, gross receipts or turnover during the F.Y. immediately preceding the F.Y. in which such benefit or perquisite is provided by such person, does not exceed, • in case of business: ₹1 crore • in case of ...

Applicability of Section 194R of Income Tax Act, 1961 : -Any person responsible for providing to a resident -any benefit or perquisite -whether convertible into money or not -arising from business or profession by such resident -shall deduct TDS. Explanation: Person responsible for providing means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof. Applicable w.e.f. : 1 st July, 2022. Rate of TDS : 10% of the value or aggregate of value of such benefit or perquisite. Comment: The benefit or perquisite which has been provided on or before 30 th June 2022, would not be subject to tax deduction under Section 194R of the Act. Threshold limit (from recipient’s perspective) : The provisions of this Section shall not apply in case of a resident where the value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the F.Y. does not exceed ₹20,000. Comment: The threshold limit of ₹20,000 shall be counted from 1 st April, 2022 onwards. Time of deduction : Before providing any benefit or perquisite. Non-applicability (from deductor’s perspective) : The provisions of this Section shall not apply to a person being an individual or HUF, whose total sales, gross receipts or turnover during the F.Y. immediately preceding the F.Y. in which such benefit or perquisite is provided by such person, does not exceed, • in case of business: ₹1 crore • in case of ...

Scope and coverage of Section 194R • Deductor is not required to check whether the benefit or perquisite is taxable in hands of the recipient under any of the provisions of the Income Tax Act. • No requirement to check whether the amount itself is taxable or not • • Wholly in cash • Wholly in kind • Partly in cash and partly in kind • Benefit or perquisite can also be in the form of providing a capital asset (for example, car, land, etc.) Sales discounts, cash discounts, and rebates • Sales discount, cash, discounts, and rebates allowed to customers from the listed retail price represents a lesser realisation of the sale price itself. To that extent, the purchase price is also reduced. Logically, these are benefits but in order to remove the potential difficulty for the seller, no TDS is required to be deducted on sales discounts, cash discounts, or rebates allowed to customers. • Freebies provided on purchases of some items, (for example, one item free on purchase of four items) are not to be subjected to Section 194R • However, Section 194R applies here: • When a person gives incentives (other than discount, rebate) in the form of cash or kind such as a car, television, computer, gold coin, mobile phone, etc. • Sponsoring a trip for the recipient and his/her relatives, upon achieving certain targets • Providing a free ticket for an event • Providing free medical samples to doctors Valuation of perquisite or benefits The valuation would be the fair market price (FMV) of b...

The Central Board of Direct Taxes (CBDT) on Thursday issued guidelines seeking to address likely issues emanating from application of the newly introduced section 194R of the Income Tax Act for withholding 10% tax (TDS) on benefits or perquisites from non-salary sources. The new provision part of the Finance Act 2022 will become effective from July 1. Unaccounted cash in bank locker? Taxmen may knock at your door It is made clear that the benefit or perquisite covered under Section 194R can be either in cash or in kind or partly in cash and partly in kind. The nature of asset given as benefit or perquisite is not relevant and even capital assets given as benefit or perquisite are covered within the scope of Section 194R. CBDT categorically uses the phrase ‘of whatever nature’ on benefit or perquisite for fastening TDS liability on the payer. However, CBDT has provided a breather on sales discount, cash discount and rebates allowed to customer by excluding them from the purview of Section 194R as their inclusion would put the seller into difficulties. Section 194R will apply to seller giving incentives, other than discount or rebate, which are in cash or kind e.g., car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, medicine samples to medical practitioners. “The guidelines have been issued in time considering the section is effective from 1 July and seeks to provide clarity on multiple fronts. Certain aspects, particularly applicability of withholding...

Mukesh Kohli – [2022] 139 taxmann.com 422 (Article) The Finance Act, 2022 inserted a new section The new section mandates a person, who is responsible for providing any benefit or perquisite to deduct tax at source @10% of the value of aggregate of value of such benefit or perquisite. The benefit or perquisite may or may note be convertible into money but should arise either for carrying out of business, or from exersing a profession, by such resident. The Central Board of Direct Taxes brought guidelines for removal of difficulties under sub-section (2) of section 194R of the Income Tax Act, 1961 on 16/06/2022 vide circular No. 12 of 2022. There are certain points where the CBDT has given guidelines which are contrary to the decision of Apex Court. Circulars or instructions do bind the department and its officer but they do not bind the court in interpretation of statutory provisions. Circulars issued by Govt. department cannot have any primacy over the decision of jurisdictional High Court. Circulars and instruction issued cannot survive if these are contrary to the decision of a constitutional court. Circulars or instruction given by the department are no doubt binding on the authorities under the Act but when the Supreme Court or the High Court has declared the law on the question arising for consideration, it will not be open to contend that circular should be given effect and not the view expressed in the decision of the supreme court or the high court. There are foll...

1. As per clause (iv) of section 28 of the Act, the value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession is to be charged as business income in the hands of the recipient of such benefit or perquisite. However, in many cases, such recipient does not report the receipt of benefits in their return of income, leading to furnishing of incorrect particulars of income. 2. Accordingly, in order to widen and deepen the tax base, it is proposed to insert a new section 194R to the Act to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite. For the purpose of this section, the expression ‘person responsible for providing’ has been proposed to mean a person providing such benefit or perquisite or in case of a company, the company itself including the principal officer thereof. 2.1 Further, in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of...