Section 194R TDS – Analysis -KarSaathi

 

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Finance Act 2022 inserted a new section 194R in the Income-tax Act, 1961

(hereinafter referred to as "the Act") with effect from " July 2022.

 

The new section mandates a person, who is responsible for providing any benefit or prerequisite to a resident, to deduct tax at source @ IO% of the value or aggregate of the value of such benefit or perquisite, before providing such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business or from exercising a profession, by such resident.

 

This deduction is not required to be made if the value or aggregate of the value of the benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed twenty thousand rupees.

 

The responsibility of tax deduction also does not apply to a person, being an Individual/Hindu undivided family (HUF) deductor, whose total sales / gross receipts / gross turnover from business does not exceed one crore rupees, or from profession does not exceed fifty lakh rupees, during the financial year immediately preceding the financial year in which such benefit or perquisites is provided by him.

 

No need to check if the amount is taxable under section 28

The deductor is not required to check whether the amount of benefit or perquisite that he is providing would be taxable in the hands of the recipient under clause (iv) of section 28 of the Act. The amount could be taxable under any other section like section 41(1) etc. Section l94R of the Act casts an obligation on the person responsible for providing any benefit or prerequisite to a resident, to deduct tax at a source of @10%. There is no further requirement to check whether the amount is taxable in the hands of the recipient or under which section it is taxable.

 

Provision applicable even if benefit or perquisite is paid in cash

Tax under section 194R of the Act is required to be deducted whether the benefit or perquisite is in cash or in-kind

Capital assets also covered

Sales discount, cash discount, and rebates

Sales discounts, cash discounts or rebates allowed to customers from the listed retail price represent the lesser realization of the sale price itself. To that extent purchase price of customers is also reduced.

Govt. entities are exempt

GST shall not be included in the valuation of benefit/perquisite

TDS on reimbursement cost incurred by the service provider