194R Deduction of tax on benefit or perquisites in respect of business or profession Section 194R is applicable only when the benefits or perquisites
Section 194R of the Income Tax Act
A new section 194R has been inserted in The Finance Act 2022, which requires deduction of tax deducted at source (TDS) @ 10% before providing such benefit or prerequisite for providing any benefit or perquisite, whether convertible in money or not in respect of business or profession to a resident in excess of Rs. 20,000/- (Twenty thousand rupees).
Section 194R is applicable only when the benefits or perquisites are wholly in kind or partly in cash and partly in kind but if the benefits or perquisites are paid in cash then this benefit will be taxable in 194H as Commission Income.
This section also provides the exclusion for Individual and HUF (Hindu Undivided Family), if their Turnover/Gross Receipt from business is less than 1 Crore or if their Turnover/Gross Receipt from the profession is less than 50 Lakhs then no need to deduct tax deducted at source (TDS) under section 194R.
Benefits or perquisites referred to in this section 194R is not the perquisite u/s 17(2), under the head salary income, paid or payable by the employer to employees, as for that perquisite u/s 17(2), another TDS section 192 is already there.
These benefits or perquisites proposed to be covered by this new section 194R are those perks, benefits, amenities, or facilities, probably in kind, or in a combination of cash and kind, which a resident person enjoys, pursuant to, or in the exercise of his business or profession, in lieu of the regular consideration payable to him, in monetary terms, in the exercise of such business or profession. Such benefits or perquisites are taxable as business receipts u/s 28(iv) of the Income Tax Act.
(1) Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or prerequisite at the rate of ten per cent of the value or aggregate of the value of such benefit or perquisite:
Provided that in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of the whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite:
Provided further that the provisions of this section shall not apply in case of a resident where the value or aggregate of the value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees:
Provided also that the provisions of this section shall not apply to a person being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of the profession, during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person.
(2) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(3) Every guideline issued by the Board under sub-section (2) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person providing any such benefit or perquisite.
Explanation.—For the purposes of this section, the expression “person responsible for providing” means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof.
Section 194R is applicable only when the benefits or perquisites are wholly in kind or partly in cash and partly in kind but if the benefits or perquisites are paid in cash then this benefit will be taxable in 194H as Commission Income.
This section also provides the exclusion for Individual and HUF (Hindu Undivided Family), if their Turnover/Gross Receipt from business is less than 1 Crore or if their Turnover/Gross Receipt from the profession is less than 50 Lakhs then no need to deduct tax deducted at source (TDS) under section 194R.
Benefits or perquisites referred to in this section 194R is not the perquisite u/s 17(2), under the head salary income, paid or payable by the employer to employees, as for that perquisite u/s 17(2), another TDS section 192 is already there.
These benefits or perquisites proposed to be covered by this new section 194R are those perks, benefits, amenities, or facilities, probably in kind, or in a combination of cash and kind, which a resident person enjoys, pursuant to, or in the exercise of his business or profession, in lieu of the regular consideration payable to him, in monetary terms, in the exercise of such business or profession. Such benefits or perquisites are taxable as business receipts u/s 28(iv) of the Income Tax Act.
Summary of 194R
| Applicable from 1st July 2022 | |
| Rate of TDS | 10% |
| Deduction Limit | Exceeding Rs. 20,000 |
| Deductee | Resident |
| Not Applicable on HUF & Individual if | |
| Turnover or Gross Receipt from business | Less than 1 Crore |
| Turnover/Gross Receipt from Profession | less than 50 Lakhs |
| Any other Conditions: | |
| Only applicable when wholly in kind or partly in cash and partly in kind. |
Example
- Mr Ram is a businessman of Mobiles. Having turnover more than 1 Crore.
- one retailer whom he supplies has 40 Lac Rs business in the previous year and as per company policy, if the retailer has business more than 30 lac, the company will give him an outdoor trip without cost.
- for say trip cost around 70,000/-
- so here is Mr Ram is liable to deduct TDS @ 10%.
- If there is no cash or money involved so Mr. ram has to pay TDS out of his own pocket.
- if in the previous year Mr Ram's turnover is less than 1 Crore then Mr Ram is not required to deduct TDS.
Extract of Section 194R
Section 194R: Deduction of tax on benefit or perquisites in respect of business or profession(1) Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or prerequisite at the rate of ten per cent of the value or aggregate of the value of such benefit or perquisite:
Provided that in a case where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of the whole of such benefit or perquisite, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax required to be deducted has been paid in respect of the benefit or perquisite:
Provided further that the provisions of this section shall not apply in case of a resident where the value or aggregate of the value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees:
Provided also that the provisions of this section shall not apply to a person being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of the profession, during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person.
(2) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the previous approval of the Central Government, issue guidelines for the purpose of removing the difficulty.
(3) Every guideline issued by the Board under sub-section (2) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person providing any such benefit or perquisite.
Explanation.—For the purposes of this section, the expression “person responsible for providing” means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof.
COMMENTS