TDS on perquisites arising in business or profession:

1. Sec 194R has been introduced in Finance Act 2022 and made applicable from 1st July, 2022.
2. It seeks to deduct tax at source (TDS) in case a person provides any benefit or perquisite in kind to a resident at the time of execution of a business transaction.
3. It is important to note that this TDS arises only in the course of a business transaction. Salary perquisite is not covered by this provision.
4. Example: Freebies to doctors, personal benefits such as foreign tours to professionals in lieu of compensation, etc.
5. The rate of TDS is 10%.
6. No TDS would be applicable in case of benefit/perks per person is not more than 20,000 in a Financial Year and for calculating Aggregate limit of Rs. 20,000 financial year is to be considered as a whole and not period after 01/07/2022.
7. No TDS is to be deducted when deductor is an Individual/HUF in business/professional with turnover/receipts in business/professional below Rs.1 Crore / Rs.50 Lakhs.
8. Point to ponder: whether Sec 194R would get attracted in the case of free samples?

Team – Intellex Strategic Consulting Pvt Ltd

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