TDS U/s 194R, Income Tax Act,1961: -

 

Deduction of Tax on Benefit/Perquisite in Respect of Business/Profession: -

  

Section 194R Income Tax Act,1961 provides that whereincase any person being Individual/HUF who is engaged in any Business with turnover therewith crossing threshold of Rs. 1 Crores in immediately preceding financial year or that, is engaged in any profession having gross receipts therein exceeding threshold of Rs. 50 Lakhs in immediately preceding financial year, then such person be covered within ambit of this section. Further, in case of any assessee other than Individual/HUF, such assessee is by default covered under ambit of this section. Now, if anyone from aforementioned categories of person is giving any benefit/perquisite whether convertible in cash or not, as a part of his/their business/profession to any resident and value of such benefit/perquisite is found to be in excess of Rs. 20,000/- during whole of the financial year under consideration, then the person giving such benefit/perquisite is bound to deduct tax at source in terms of Section 194R at the effective rate of 10%, before providing any such benefit/perquisite.  

Note that, in case the said benefit/perquisite are partly in monetary form & partly non-monetary and monetary portion is insufficient to meet out TDS liability, or that, if the same is fully in non-monetary form, then the person providing such benefit/perquisite shall make sure that the person receiving such benefit/perquisite has himself paid necessary amount of TDS to the credit of government, by verifying TDS Deposit challan.

Let’s understand same with an example:

1.    Mr. A engaged in insurance business via several insurance agents has planned to pay one-time incentive to one of its prominent agent Mr. X amounting to Rs. 50,000/-, then A will first deduct TDS @ 10% i.e. Rs. 5,000/- and then pay balance Rs. 45,000/- to X.

2.    Mr. A engaged in insurance business via several insurance agents has planned to sponsor a family trip for one of its prominent agent Mr. X along with his family valuing worth Rs. 32,500/-. In given circumstances benefit provided by A to X is fully in kind(non-monetary), thus A needs to make sure before releasing such benefit that X has paid required amount of TDS on same i.e. Rs. 3,250/- in given case being 10% of Rs. 32,500/- to the credit of government.   


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