NEW DELHI: The income tax agency released rules on Thursday about the applicability of the new TDS provision to advantages obtained in a business or profession, stating that such benefits can be in cash, in kind, or a combination of both.
The Central Board of Direct Taxes (CBDT) also stated that the payer/deductor is not required to check the taxability of the amount in the recipient's possession, and that the nature of the asset given as a benefit or perquisite is irrelevant. Even capital assets received as a benefit or perquisite are covered by Section 194R. Section 194R also applies to sellers who provide incentives to medical practitioners in the form of cash or kind, such as a car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, or pharmaceutical samples, in addition to discounts or rebates. To combat tax revenue leakage, the Budget 2022-23 included a provision for Tax Deducted at Source (TDS) on such income. The Budget added a new section to the I-T Act, 194R, that requires any person who provides any benefit or perquisite to a resident above Rs 20,000 in a year to deduct tax at source at a rate of 10% resulting from such resident's business or profession to deduct tax at source at a rate of 10%.
The new rule will take effect on July 1st. The CBDT specifies that if doctors receive free samples of drugs while working in a hospital, Section 194R applies to the distribution of the free samples to the hospital. As an employer, the hospital can classify such samples as taxable prerequisite for employees and deduct tax under Section 192.
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