Section 194R : TDS on benefit or perquisite of a business or profession

In the Finance Bill, 2022, government has inserted a new section in The Income Tax Act, 1961, Section 194R applicable w.e.f 01st July, 2022 with an objective of bringing into a tax, all those benefits or perquisites which a person receives during the course of business or profession but do not discloses the same in the return of income, leading to furnishing of incorrect particulars of income.

Section 194R states that when any “person responsible for providing” to a resident, any perquisite or benefit (whether in cash or in kind) arising in the course of carrying out of a business or profession by such resident, such person (payer) should before remitting the same to such resident (receiver) deduct a tax @ 10% of the value or aggregate value of such benefit or perquisite.

However, TDS shall not be applicable if the value or aggregate value of the benefit or perquisite does not exceeds Rs. 20,000/- during the Financial Year.

This section shall not be applicable to an “Individual” or a “HUF” whose total sales or gross receipts from the business or profession does not exceeds Rs. 1 crores in case of business or Rs. 50 lacs in case of profession.

This section also states that, where the benefit or perquisite paid is wholly in kind or partly in cash or partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite, the person (payer) before releasing the benefit or perquisite, must ensure that the tax has been paid in respect of that benefit or perquisite.

This section also contains one explanation on “Person responsible for providing” – It states that a “person responsible for providing” means the person providing such benefit or perquisite, or in the case of a company, the company itself including the principal officer thereof.

So, w.e.f 01st July, 2022 every person falling under this section before remitting any such benefits or perquisites shall ensure to comply with the requirement of deducting tax or must ensure that tax should have been discharged w.r.t that benefit or perquisite.