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TAX TREATMENT AND ACCOUNTING ENTRIEOF PERQUISITES AND BENEFITS ON WHICH TDS MADE UNDER SECTION 194-R

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EDDANAPUDI MURALI KRISHNA

Income Tax Consultant

32 Points Posted on 13 September 2026

Sir, one of my clients is a fertiliser dealer selling fertilisers and pesticides on retail and whole sale basis. The two supplier companies have taken for foriegn tour and spent Rs.25-00 lakhs and deducted tax under section 194-R. The dealer did not get any monitary benefit directly but it is for recreational purpose . How to account for the so called perquisites in the books of accounts and if we show it as receipt in books on credit side and under which head of expenses it is to be debited in books. Parteners were taken on tour since it is a partnership firm. Will the IT Department allow the expenses ? Whether the firm firm can claim the expenditure as business promotion expenditure ?

Replies (5)

Quick Summary

This discussion addresses the accounting and tax implications of perquisites and benefits subject to TDS under Section 194R. It explores how a fertiliser dealer should account for a foreign tour sponsored by suppliers, which was purely recreational. The advice suggests crediting the benefit as business income under Section 28(iv) but anticipates disallowance as a business expense under Section 37(1) due to its personal nature. The firm can claim credit for the TDS deducted.

Aashok FC Advisory

Finance Compliance Consultant

789 Points Posted on 13 September 2026

The benefit of ₹25.00 lakhs must be credited as business income under Section 28(iv) to align with Section 194R TDS. However, because the foreign tour was purely recreational for the partners, the Income Tax Department will disallow the ₹25.00 lakhs deduction under Section 37(1) as a personal expense. The firm can claim full credit for the TDS deducted.

EDDANAPUDI MURALI KRISHNA

Income Tax Consultant

32 Points Posted on 14 September 2026

Thank you. Can you share journal entries for the said perquisites in books.

Aashok Kumar Sharma

Finance/Compliance Consultant

75659 Points Posted on 14 September 2026

To summarize, record ₹25.00 lakhs as Business Perquisite Income under Section 28(iv) with ₹2.50 lakhs credited to TDS Receivable under Section 194R. Debit the remaining ₹22.50 lakhs to Partners' Capital/Drawings or disallow it under Section 37(1) in the tax computation, allowing the firm to claim the full TDS credit while keeping personal expenses out of allowable business deductions.