Tax Applicability on Sales Promotion

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This discussion clarifies the tax treatment for companies and LLPs providing a car free of cost to a customer as part of a sales promotion. While the car can be debited to sales promotion expenses with no additional tax liability for the company, Tax Deducted at Source (TDS) must be collected from the customer at 30% plus cess, under Section 194B of the Income Tax Act.

SUDHEEP M

SUDHEEP M (Querist)
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23 October 2021 Sir,

I want to know the tax implication on a Company or LLP which was given a Car free of cost to a customer in connection with a sales promotion campaign.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2021 Is it company car or rented one?

SUDHEEP M

SUDHEEP M (Querist)
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23 October 2021 Car was given as a gift to the customer. Car was purchased in the name of the customer, but payment was given by the company / LLP.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2021 The cost of car can be debited to sales promotion expense. No additional tax liability.
But TDS has to be collected from the customer at 30% +cess.

SUDHEEP M

SUDHEEP M (Querist)
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23 October 2021 Sir kindly clarify in which section TDS should be Collected and Paid

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2021 Sec. 194B of IT act...

SUDHEEP M

SUDHEEP M (Querist)
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23 October 2021 k.. Thank You Sir...

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 October 2021 My Pleasure ...