Table of Contents
- Introduction
- Key Issues
- When TDS under Section 194R is not applicable?
- Where can the deductee verify the details of TDS deducted under section 194R?
- Which Form is required to file quarterly TDS return?
- What informations are included in Form 16A and Form 26Q regarding TDS under section 194R?
- Conclusion
- TDS Section 194R Snapshot
Introduction
The Finance Act 2022 stirred a hornet's nest by inserting section 194R under Income Tax Act, 1961. As per this section, any resident person giving benefits or perquisites to any person aggregating to twenty thousand rupees (20,000) or more during the course of business and profession & during the financial year shall deduct TDS @10% on the amount of benefit or fair market value in case the benefit is in kind, with effect from 1st July 2022, however the limit of Rs. 20,000 will be calculated from 1st April 2022.
Responsibility to deduct TDS under this section is not casted on the Individual/HUF in case the total sales during the immediate preceding financial year do not exceed 1 Crore rupees in case of business and 50 Lakh rupees in case of the profession.
Key Issues
The application of TDS under this provision will be troublesome because benefits or perks typically provided by businesses and professions are in kind and TDS deduction on kind during the normal course of activities is highly difficult for the responsible person. This will also increase the expenses for the corporates as the person on whom the responsibility to deduct TDS is casted will now in addition to the benefit given in kind will make a deposit to the Tax Authorities in form of TDS.
For Example, A cloth businessman gives benefits/perquisites in kind to the salesperson,
|
Payer |
Payee |
Benefit FMV |
TDS Amount to be deposited |
|
Businessman |
Salesperson |
Rs. 50,000 |
= Rs. 50,000 *10% = Rs. 5,556 90% |
Sales Discount, Cash Discount, or rebates allowed to customers from the listed retail price are exclusively removed from the purview of benefits/perquisites.
Social Media Influencers have been relieved from TDS under this section when goods given to them for branding /marketing have been returned by them.
When TDS under Section 194R is not applicable?
TDS under Section 194R is not applicable are not applicable :
- If the recipient of the benefit is a NRI.
- If there is an employer-employee relationship.
- If there is no business relationship between the transacting parties
- If the total value of the benefit is less than INR 20,000.
Where can the deductee verify the details of TDS deducted under section 194R?
Deductees can verify TDS details under section 194R, in their Form 26AS.
The deductor is required to furnish Form 16A to the deductee reflecting TDS details under section 194R every quarter to provide a summary of TDS deducted.
Which Form is required to file quarterly TDS return?
Form 26Q is used by the deductor to file quarterly returns of TDS deducted under section 194R.
What informations are included in Form 16A and Form 26Q regarding TDS under section 194R?
Form 16A contains TDS details for deductees, while Form 26Q includes comprehensive TDS data filed by the deductor for section 194R transactions.
Conclusion
The applicability of TDS on perquisites, Business Gifts, Vouchers shall widen the horizon of Income Tax Authorities as recipients of this income will now file their Income Tax Return for claiming a refund, which is otherwise not being offered to tax by them.
TDS Section 194R Snapshot
|
Payer |
Payee |
Rate |
Per person per year limit |
|
All Person except Individual/HUF which do not cross Tax Audit Limit. |
Person on whose name benefit/perquisite is received. |
10% |
Rs. 20,000 |
Disclaimer: The article is issued just for the knowledge and guidance of the intended user. The author is not rendering any professional service or advice in whatsoever form by means of the above information.
The Author is pursuing his CA Final in an Indore based firm. Feel free to reach out in case you have any questions.
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