TDS DEDUCTED UNDER SECTION 194R WHERE TO SHOW IN ITR AND GST.

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This discussion clarifies how to report TDS deducted under Section 194R in your Income Tax Return (ITR), specifically under the 'Business or Profession' head for proprietorships (ITR-3). It also explains the GST implications: GST applies to benefits in kind but not to cash payments. Credit notes for sales targets are generally not subject to 194R unless they represent a separate incentive. Expenses for dealer functions are considered under 194R if they include leisure or reward elements beyond genuine business training.

backup 1989

backup 1989 (Querist)
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24 November 2025 I AM REGISTERED IN GST AS PROPRIETORSHIP BUSINESS
TDS has been deducted under Section 194R and reflected in Form 26AS. Where should this amount be shown in the Income Tax Return (ITR)?

Which income head (e.g., Business/Profession, Other Sources) should this amount be reported under?

GST Liability on Amount for which TDS is Deducted under Section 194R?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 November 2025 Income covered under Section 194R (benefits/perquisites arising from business or profession) should be reported in ITR under the head “Business or Profession”, in your ITR (ITR-3 for proprietorship).

If the benefit/perquisite is given in kind (e.g., free goods, sponsored trips, gold coins, appliances), it may qualify as a supply under GST. If the benefit is purely cash, then GST does not apply, since GST is levied only on supply of goods/services, not on money transfers.

CMA Sagar Das

CMA Sagar Das (Expert)
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26 November 2025 If Credit Note issued to Customers for meeting Sales target, then it will come under 194R or not?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 November 2025 Generally, credit note issued to a customer for meeting a sales target (for example, issued against past invoices and reducing sale consideration) will generally not attract TDS under Section 194R of the Income Tax Act. This type of incentive is considered a post-sale discount or rebate and is treated as a reduction of the sale price rather than a separate benefit or perquisite for the purpose of Section 194R.
However, if the “credit note” actually represents a separate cash incentive or benefit (not just price reduction), section 194R can apply if other conditions are met.

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CMA Sagar Das

CMA Sagar Das (Expert)
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27 November 2025 One more question dealers attended a domestic function arranged by the Company. The travelling cost and hotel stay cost come under the purview of 194R?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 November 2025 The company must assess the true nature of the function:
If the function is a genuine business/dealer conference (for general education/training) and strictly limited to business activities and necessary stay/travel, it might not attract TDS under Section 194R.

If the function includes elements of leisure, reward for target achievement, or family participation, the entire cost (or at least the value of the "benefit" portion) related to travel and hotel stay would be considered a perquisite, and the company must deduct TDS at 10% on the value if the aggregate benefits exceed the ₹20,000 threshold in a financial year.

For detail analysis refer: https://avanetwork.in/wp-content/uploads/2025/03/Demystifying-Sec.194R-Taxing-Times-Ahead.pdf

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