TDS 194R – TDS on Perks like Travel vouchers, Gold Coins, Cars, Freebies
Do you sometimes give Gifts to your Customers ?
on Diwali ?
on Marriage Like Events ?
Good, now please remember to take their PAN number, and take TDS also from them if possible, or pay from your own pocket this TDS and deposit it by 7th of next month.
One more thing, if you think, you will hide it ? …… In that case the expense itself will be disallowed. for non deduction of TDS
This new section 194R requires deduction of tax at source @ 10%, by any person, providing any benefit or perquisite, exceeding Rs. 20,000 in value, in a year, to a resident, arising from the business or profession of such resident and such benefit or perquisite is in the nature of income falling under section 28(iv) of the Income tax Act.
Disallowance Provision – IT Act
40(a)(ia) : In that case, 30% will be Disallowed.
Section 40(a) (ia) says…… thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139
Note : Our this 194R is in Chapter XVII-B hence fully covered.
Example : Gift Given : Rs 50000 worth of Gold Coin. Dont want to Deduct TDS. Get this disallowed. And Pay Tax 22+sc+cess = 26% on the 30% of this coin = Rs 15000 x 26% = Rs 3900
so the Gold Coin is now costing not Rs 50,000, but Rs 53,900.
Penal Provision – TDS Rules
Plus, the implications under TDS rules, TDS non payment penalties, TDS interest, etc will continue…. there is no exemption, to that. That continues.
The new provision part of the Finance Act 2022 will become effective from July 1.
CBDT. vide Circular No. 12/2022 dated 16.06.2022, issues guidelines for removing difficulties on implementation of Section 194R On guidelines on deduction of tax at source under.
The Central Board of Direct Taxes (CBDT) gave some clarifications
According to the guidelines, it is not necessary for the payer/deductor to check the taxability of the sum in the hands of the payee before deducting TDS by clearly distinguishing the principles governing TDS under Section 195 from the TDS under Section 194R.
- It is made clear that the benefit or perquisite covered under Section 194R can be either in cash or in kind or partly in cash and partly in kind.
- The nature of asset given as benefit or perquisite is not relevant and even capital assets given as benefit or perquisite are covered within the scope of Section 194R.
- CBDT categorically uses the phrase ‘of whatever nature’ on benefit or perquisite for fastening TDS liability on the payer.
Section 194R will apply to seller giving incentives, other than discount or rebate, which are in cash or kind e.g., car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, medicine samples to medical practitioners.
However, CBDT has provided a breather on sales discount, cash discount and rebates allowed to customer by excluding them from the purview of Section 194R as their inclusion would put the seller into difficulties.
This law was enacted via Budget / Finance Act 2022