Implications of the Section 194-R of the Income-tax Act

Written by Saptaparni Raha, Lawyer

Introduction:

Section 194-R inserted in the Income-tax Act became effective from 1st July 2022. It mandates a person providing benefit to another person for their business/ profession to deduct a source @10% of the aggregate of the value of such benefit or perquisite.

Eligibility:

Section 194-R applies to a person who is responsible for providing to a resident any benefit or perquisite, whether convertible into money or not, arising from business or exercise of a profession of such resident. It says that such a person shall, before providing such benefit or prerequisite, ensure that the tax has been deducted.

Conditions:

• Perquisites or benefits may not be convertible to money but must arise from any profession or business.

• Perquisites may either be in cash or kind or partly both.

• The taxability of the sum in the hands of the recipient needs to be checked by the taxpayer.

• The deductor has no obligation to check whether the benefit provided is taxable as business income for the recipient or not.

Conclusion:

GST is excluded from the purchase value or fair market value or such benefit or perquisite for the purpose of tax at source deduction.

References:

• Pradeep Agarwal, Section 194R-TDS on benefits or prerequisite provided (taxguru)

• Nitesh Buddhadev, From tomorrow, TDS on social media influencers. Tax expert explains how it will work (The Financial Express)

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