TDS under section 194R on the benefit or perquisite
Finance Minister proposed in the Union Budget 2022-23, TDS under section 194R on the benefit or perquisite of a business or profession
The concern behind this New Section of TDS:
As per clause (iv) of section 28 of the Act, the value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession is to be charged as business income in the hands of the recipient of such benefit or perquisite.
However, in many cases, such recipient does not report the receipt of benefits in their return of income, leading to the furnishing of incorrect particulars of income.
Accordingly, in order to widen and deepen the tax base, it is proposed to insert a new section 194R to the Act to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of 10% of the value or aggregate of the value of such benefit or prerequisite.
For the purpose of this section, the expression ‘person responsible for providing’ has been proposed to mean a person providing such benefit or perquisite or in case of a company, the company itself including the principal officer thereof.
Further, in a case where the benefit or perquisite, as the case, may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of the whole of such benefit or perquisite, the person responsible for providing such benefit of perquisite shall, before releasing the benefit or perquisite, ensure that tax has been paid in respect of the benefit or perquisite.
Threshold Limit: No tax is to be deducted if the value or aggregate value of the benefit or perquisite paid or likely to be paid to a resident does not exceed Rs. 20,000/- during the financial year.
Applicability: The provisions shall not apply to an individual or a Hindu undivided family, whose total sales, gross receipts, or turnover does not exceed
(a) Rs. 1 Crore in case of business or
(b) Rs. 50 Lakhs in case of the profession
during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided.
This amendment will take effect from 1st July 2022.
Also Read: Union Budget 2022 amendments proposed in the Income Tax
Memorandum Explaining the Provisions in the Financial Bill
Read More on Budget 2022
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