The Finance Act, 2022 had inserted a new section 194R to the Income Tax Act, 1961 providing for deduction of tax at source (TDS) @ 10% on the benefit or perquisite paid to a resident businessman or professional arising from its business or profession. Section 194R is applicable from July 1, 2022.
Section 194R(1):- Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise 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 percent of the value or aggregate of value of such benefit or perquisite.
Provided that in 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 of cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite.
Provided further that the provisions of this section shall not apply in case of resident where the aggregate value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees.
Provided also that the provision of this section shall not apply to individual or HUF whose gross receipts or turnover does not exceed one crore rupees for business or fifty lakhs rupees for profession during the financial year immediately preceding the financial year in which such benefit or perquisite is provided by such person.
Whether sales discount, cash discount and rebates are covered under benefit or perquisite? – The answer is No, both the discounts and rebates are not covered under the benefit or perquisite, except the nature provided below:
a) any incentive is given in form of car, TV, computers, etc.
b) any person sponsors a trip for his/her recipient and relative upon achieving certain target.
c) providing free ticket for an event.
The benefit or perquisite given as capital asset will be taxable in the hands of recipient as benefit or perquisite.