Section 194R

Jun 27, 2022

To remove difficulties in implementing the provisions of section 194R, CBDT has issued guidelines, the key takes away from the guidelines are provided below

1. Capital assets like cars, land, etc. given as benefit or perquisite would be covered within the ambit of deduction of tax at source under section 194R.

2. No tax is required to be deducted under section 194R on sales discounts, cash discounts, and rebates allowed to customers.

3. The provision of section 194R of the Act shall not apply if the benefit or perquisite is being provided to a Government entity, like Government hospital, not carrying on business or profession.

4. GST will not be included for the purposes of valuation of benefit/perquisite for TDS under section 194R of the Act.

5. The valuation of benefit/perquisite shall be based on fair market value of the benefit or perquisite. However, if deductor has purchased the benefit/perquisite before providing it to the recipient. In that case, the purchase price shall be the value for such benefit/perquisite. Further, if the deductor manufactures such items then the price that it charges to its customers for such items shall be the value for such benefit/perquisite.

6. If any expenses incurred by service provider are met by service recipient then the same shall be treated as benefit or perquisite. However, if the invoice has been obtained in name of service recipient and then the reimbursement made by service recipient will not be considered as benefit/perquisite for the purposes of section 194R.

7. In the case of social media influencers, they will be liable for TDS if the product allotted to them by a company for its marketing efforts is retained by the individual. However, the TDS will not apply if the product is returned to the company.

8. In the case of doctors, if doctors are receiving free samples of medicines while employed in a hospital, Section 194R would apply on the distribution of free samples to the hospital. The hospital as an employer may treat such samples as taxable perquisite for employees and deduct tax under Section 192. In such cases, the threshold of Rs 20,000 has to be seen with respect to the hospital.



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