TDS on perquisites arising in business or profession vs. Foregin Tour Expenses,Discount, Incentives
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FA 2022 has introduced a new section 194R which provides for TDS on certain business expressed by the payer. Let us have a short overview of the same:
1. Sec 194R has been introduced in Finance Act 2022 and made applicable from 1st July, 2022.
2. It seeks to deduct tax at source (TDS) in case a person provides any benefit or perquisite in kind to a resident at the time of execution of a business transaction.
3. It is important to note that this TDS arises only in the course of a business transaction. Salary perquisite is not covered by this provision.
4. Example: Freebies to doctors, personal benefits such as foreign tours to professionals in lieu of compensation, etc.
5. The rate of TDS is 10%.
6. No TDS would be applicable in case of benefit/perks per person is not more than 20,000 in a Financial Year and for calculating Aggregate limit of Rs. 20,000 financial year is to be considered as a whole and not period after 01/07/2022.
7. No TDS is to be deducted when the deductor is an Individual/HUF in business/professional with turnover/receipts in business/professional below Rs.1 Crore / Rs.50 Lakhs.
There are few issues which still remain to be answered?
1. Whether Section 194R would get attracted in the case of free samples?
2. Whether Section 194R would be applicable in respect of special discounts and incentives which are offered?
3. Whether section 194R would be applicable in respect of foregin tour organised by the company which is in the name of “meeting”at abroad destination or at Indian High profile destination like MDRT by Insurance Companies, Bangkok Tour, Singapore tour by electronic applicables companies etc.
4. The amount on which TDS will be applicable will also be an issue. For example, a company offered the Singapore tour to the dealer on achieving some target. The market price of the tour was Rs. 1 Lakh but the company purchased it at a discounted price for 75 people at Rs. 25 Lakh in aggregate i.e., Rs. 50,000/- per person. In this case, whether TDS will be on Rs. 50,000 or Rs. 1 Lakh will be an issue.
5. There may be a case wherein X Ltd company has offered a Singapore tour to M/s ABC Pvt Ltd as a result of completion of a fixed target. The M/s. ABC Pvt Ltd has offered the tour to its employees. Now, the amount first would be taxable in the hands of M/s ABC Pvt Ltd and it would be required to do TDS. Thereafter, ABC Pvt Ltd would tax the amount as perquisite U/s 192 in the hands of the employee?
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