TDS u/s 194R for Credit Notes issued

This query is : Resolved

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Credit notes issued to customers for achieving sales targets are generally considered a benefit or perquisite under Section 194R of the Income-tax Act. If the total value of these benefits surpasses £20,000 in a financial year, the issuer must deduct TDS at a rate of 10% before providing the credit note. This applies even though credit notes are accounting adjustments, as they represent a business incentive.

CMA Sagar Das

CMA Sagar Das (Querist)
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27 November 2025 We have issued Credit Notes to the Customer for achieving the Sales Target. Is this come under the 194R provision?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 November 2025 Yes — issuing credit notes to customers for achieving sales targets generally falls under Section 194R of the Income-tax Act, since it is treated as a benefit or perquisite arising from business. If the aggregate value of such benefits exceeds ₹20,000 in a financial year, the provider must deduct TDS at 10% before granting the benefit.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 November 2025 - Credit Notes for Sales Targets:
- These are incentives linked to business performance.
- Even though they are issued as accounting adjustments (reducing payable amounts), they represent a benefit to the customer.
- CBDT guidelines clarify that such incentives — discounts, rebates, or credit notes — are covered under 194R.

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