The Income Tax Department on June 16 issued guidelines regarding the applicability of the new TDS provision in respect of profits received in any business or profession. Adding further, the IT Department said that these perquisites can be either in cash, in kind or partly in both these forms.
Among other details, the Central Board of Direct Taxes (CBDT) said the taxpayer needs to check the taxability of the amount in the hands of the recipient, and the nature of the property given as profit or perquisite is not relevant. Further, capital asset given as profit or perquisite comes under the purview of section 194R.
Further section 194R shall apply to the seller giving incentives other than exemption or exemption which is in cash or kind such as car, TV, computer, gold coin, mobile phone, sponsored travel, free ticket, sample of medicine to medical practitioners. is in.
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The new provision comes into effect from July 1, 2022
Earlier, the provision of Tax Deduction at Source (TDS) on such income was introduced in Budget 2022-23 to check leakage of tax revenue.
Budget 2022-23 brought in a new clause in the IT Act – 194R, which requires deduction of tax at source at the rate of 10 per cent by any person and any benefit or perquisite in excess of that. 20,000 in a year to a resident which arises out of the business or profession of such resident.
Further, the CBDT clarified that section 194R would be applicable for the distribution of free samples in the hospital to doctors taking samples free of cost in the hospital. The hospital as an employer can treat such samples as taxable perquisite to the employees and deduct tax under section 192. 20,000 to be seen in respect of the hospital.
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Whereas for doctors working as consultants in a hospital and receiving free samples, TDS would ideally be applicable on the first hospital, which would require tax deduction under section 194R in respect of consultant doctors.
CBDT clarified that as an option to remove the hardship, the basic benefit or perquisite provider can directly deduct tax under section 194R in respect of Consultant Physician as recipient.
The government department clarified that section 194R would apply if profit or perquisite is provided to a government institution like a government hospital, which is not carrying on business or profession.
Apart from hospitals, the CBDT also provided relief on sales discounts, cash discounts and discounts to the customer by taking them out of the purview of section 194R, as their inclusion would put the seller in trouble.
Experts are of the view that with this new provision of CBDT, taxpayers will need to devise their own system and tracking mechanism for various regular transactions to identify and withdraw tax on such benefits and perquisites. .
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PTI quoted Nangia Andersen LLP Partner Sudin Sabnis as saying, “Applicability of benefits provided in certain aspects, especially in the cases of the recipient in business or profession etc., may open up several practical issues which the taxpayers should consider themselves as Must handle.”
Whereas AKM Global Head of Tax Markets Yeshu Sehgal said that Section 194R guidelines can prove to be effective in preventing tax leakages.
Om Rajpurohit, Director, AMRG & Associates, said through this circular, the government has practically handled all the major issues, including sale discounts, cash discounts and discounted benefits or perquisites etc.