The Union Budget 2022 introduced a new section for TDS. TDS under Section 194R relates to the deduction of tax on benefits or perquisites in respect of business and profession. The department mainly inserted this section to prevent the misreporting of income that individuals receive through perks or other non-monetary benefits from businesses or professions.
If any resident individual receives any gift, perks, incentive, or any other monetary or non-monetary benefit from a business or profession in cash, kind, or partially in cash and kind, and the value of such benefits or perquisites in monetary term exceeds INR 20,000 during the financial year to one beneficiary then this section applies to you.
If any business or profession is giving benefits or perquisites to any agent, channel partner, dealer, distributor, or any other person of an amount more than the specified amount during the financial year to one recipient then they are liable to deduct TDS under Section 194R.
However, it does not apply to the Individual/HUF to deduct TDS if the total sales don’t exceed INR 1 crore in the case of business and INR 50 Lakh in the case of a profession in the immediately preceding financial year.
The main purpose of introducing this section is to avoid tax evasion. Previously the businesses while giving the perks, benefits, and other non-monetary benefits to their dealers, partners, and other persons claimed it as a business expense while the person who is receiving such benefit was not showing this as their income.
For example- A cement manufacturing company gives non-monetary benefits like Motorcycle, electronic items, and leisure trips to their dealers if they achieve the specified targets.
In the above example, the company that has given benefits to its dealers was showing it as a business expense while the person who has received such benefit was not showing this as his income while filling the income tax return since it is in kind. So to avoid this misreporting of income the Income tax department has introduced this section 194R.
The person providing such benefits or perquisites must ensure that they deduct and pay taxes for such items before releasing them.
The liability can be discharged by any of the below options:
If the payee is depositing the TDS amount on their own then they can submit the challan to the deductor so that they can consider the Advance tax challan while filling their TDS return
If the payee is depositing the TDS amount on their own then they can submit the challan to the deductor so that they can consider the Advance tax challan while filling their TDS return
The Deductor of the tax shall issue a quarterly TDS certificate to the deductee in form 16A. The deductor can download form 16A from the Traces Account and also the deductee can see the same in their 26AS.
The deductor liable to deduct tax under Section 194R of the Income tax act shall file quarterly returns in form 26Q.
