Do you know about the TDS on Gifts , if you are a MSME….This New TDS 194R might be even 20% instead of 10% ?

Last year, a new TDS had started… this March 2023, we have the first Balance Sheets for this section’s compliance…. So, let us see this TDS on Gifts From the perspective of MSME’s

Note : TDS 194R could be effective between 10% to 25% for you. So, do read on, and take  actions in time.

This Presentation is made with MSME Entrepreneurs, in mind….and their Accounts Departments… Usually, who are supplying child parts or components to OEM’s, or manufacturing under others’ Brands
We have not covered the Large MNC’s, Large Pharma Companies, who have lot of freebee’s for their Dealers, Distributors lets understand TDS Section 194R on Gifts

Example : 5 Mobile phones for Gifting @ Rs 15000 each194R – TDS Applicable ? No, ( if separate persons )

Limit of Rs 20000. It is per gift ? No, it is per “year”
Non Resident Customer / Vendor. “excluded”. No TDS.
What if you dont get the PAN ?
TDS Rate goes upto to 20%
TDS entry in the Books ? Date ?
Own Usage vs Gift ? Treatment is different … No TDS, if use it yourself.

TDS Rate could be 20% ~ 25%

This is only for personal information of the members. Based on information & interpretations available as on today, the 26th January 2023.
Please contact your Consultant / Chartered Accountant / counsel for his final opinion, if deemed fit.
In case, you notice any difference in opinion, or difference in interpretation of the law, please share your feedback, we will try our best to improve. TDS Section 194R on Gifts

Contact Finsys : : Contact us

More Details

https://www.caclubindia.com/articles/key-highlights-union-budget-2022-23-46702.asp

https://www.caclubindia.com/articles/new-tds-sections-194r-194s-much-more-46830.asp

https://taxguru.in/income-tax/applicability-tds-section-194r-01-07-2022.html

https://taxguru.in/income-tax/tds-section-194r-section-194s.html

https://www.saraltds.com/blogs/tds-without-pan/#:~:text=The%20Maximum%20TDS%20rate%20(20,by%20the%20deductee%20is%20invalid.

https://taxguru.in/income-tax/section-194r-tds-benefits-perquisites-income-tax-act-1961.html

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Section 194R TDS on Perquisites Business Promotion

1. Exemption limit
   1. Rs 20,000 is aggregate per person per year
   2. Effect 1 :
      1. So, if “per piece” is over Rs 20,000 = then surely, go into the TDS route
   3. Effect 2 :
      1. Even if per piece is less than Rs 20,000, same person cannot be given benefit totalling to over Rs 20,000 per year

2. Consumption List
   1. Required to show the above
   2. With the voucher
   3. Remember… that same person not being repeated

3. Foreigner
   1. Non-resident is not included
   2. Consumption List
      1. Required to show the above … if non resident, then enjoy, without TDS at all
      2. Zero TDS
   3. Due to covid 19 , mostly missing, hence avoid for time being

4. TDS rate
   1. 10%
   2. With PAN
5. TDS Rate without PAN
   1. 20%
   2. Grossing up required to be done
   3. 1 lakh… means 1 lakh x 20/(100-20) =
   4. 100000 x 20/80
   5. = 25,000 becomes TDS instead of 20,000
   6. 25%
6. Entry in books
   1. Voucher time ? .. maybe
   2. Month end ? … maybe
7. Books,
   1. Separate account = yes 194R TDS

Sources

https://incometaxindia.gov.in/communications/circular/circular-no-12-2022.pdf

²⁸[Deduction of tax on benefit or perquisite in respect of business or profession.²⁹

194R. (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 perquisite at the rate of ten per cent of the value or aggregate of 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 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 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 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.]