Additional Guidelines for removal of difficulties under sub-section (2) of section 194R of the Income-tax Act, 1961
Finance Act 2022 inserted a new section 194R in the Income-tax Act, 1961 (hereinafter referred to as “the Act”) with effect from 1 st July 2022.
- The new section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @ 10% of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business, or from exercising a profession, by such resident.
- This deduction is not required to be made, if the value or aggregate of value of the benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed twenty thousand rupees.
- The responsibility of tax deduction also does not apply to a person, being an Individual/Hindu Undivided Family (HUF) deductor, whose total sales / gross receipts / gross turnover from business does not exceed one crore rupees, or from profession does not exceed fifty lakh rupees, during the financial year immediately preceding the financial year In which such benefit or perquisite is provided by him.
- Sub-section (2) of section 194R of the Act authorises the Board to issue guidelines, for removal of difficulties, with the approval of the Central Government. These guidelines are required to be laid before each House of Parliament and are binding on the income-tax authorities and the person providing the benefit or perquisite.
- Accordingly, in exercise of the power conferred by sub-section (2) of section 194R of the Act, CBDT had issued guidelines in the form of the Circular no 12 of 2022 dated 16th June 2022. Subsequently, some more clarifications are requested by stakeholders on various issues. Accordingly, this Circular is also issued under sub-section (2) of section 194R to provide clarification on Issues which will help to remove difficulties in implementation of this provision.
- It is clarified that this Circular is only for removing difficulties in implementation of provisions of section 194R of the Act and it does not impact the taxability of income in the hands of the recipient which shall be governed by the relevant provisions of the Act.
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