Section 194R: Tax Deductible on Perquisite or Benefit in Business

Section 194R of the Income Tax Act, 1961 was introduced in the Union Budget 2022 to curb tax evasion related to income received in the form of non-monetary benefits or perks from a business or profession. This section applies to any resident person who receives any gift, perquisite, incentive, or any other financial or non-financial benefit from a business or profession in cash or kind or partially in cash and partially in kind, and the value of such benefits exceeds ₹20,000 to one beneficiary during the financial year.

Any business or profession providing such benefits to its agent, channel partner, dealer, distributor, or any other person should deduct TDS at a rate of 10% if the value of such benefits or perquisites exceeds ₹20,000 during the financial year. The person providing such benefits or perquisites should ensure that TDS is deducted and paid before releasing such benefits or perquisites.

There are certain exemptions from the applicability of Section 194R. Individuals or HUFs are not required to deduct TDS under this section if their total turnover does not exceed ₹50 lakhs in the case of a profession and ₹1 crore in the case of a business in the immediately preceding financial year. TDS is also not applicable if there is no business relationship, the recipient is a non-resident, or employees receiving benefits from their employer.

At MAS, we provide our clients with support and guidance for various income tax compliances, including income tax assessments, ITR filings, tax advisory, TDS matters, and other related services. If you have any questions or wish to know more about Section 194R and its implications, feel free to reach out to us.

Conclusion

In conclusion, section 194R has been introduced to avoid tax evasion in case of income received in the form of any perks or other non-monetary benefits from the business or profession. The section aims to bring transparency in the taxation system and prevent manipulations of income by claiming expenses for the benefits or gifts provided to distributors or channel partners.

It is important for businesses and professions to comply with the provisions of section 194R to avoid any penalties or legal consequences. Non-compliance can result in penalties and interest under the Income Tax Act, 1961.

At MAS, we aid our clients with various income tax compliances, including income tax assessments, ITR filings, tax advisory, TDS matters, and other related services. We ensure that our clients comply with all the applicable provisions of the Income Tax Act, 1961, and avoid any legal consequences. If you have any questions or require any assistance with section 194R, feel free to contact us.