Budget proposal on taxation of cash perquisites- implication on loan waiver:
- As per section 28(iv) of the Income Tax Act,1961, the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise shall be taxable as business income.
- The moot question is that whether the loan amount waived off by the lender constitutes taxable income u/s. 28(iv) of the Act?
- Hon’ble Supreme Court (SC) in the case of Commissioner v. Mahindra & Mahindra Ltd.  93 taxmann. com 32/255 Taxman 305 has held that in order to invoke the provision of section 28(iv), the benefit which is received has to be in some other form rather than in the shape of money. As waiver of loan is a cash receipt, Section 28(iv) does not come into picture.
- The Budget 2023 has now proposed to amend the clause (iv) of section 28 of the Act and clarify that the said clause also applies to cases where benefit or perquisites is in cash or in kind or partly in cash or partly in kind.
- An explanation has also been proposed to be inserted in section 194R, wherein it has been clarified that provisions of section 194R (1) shall apply to benefit or perquisites whether in cash or in kind or partly in cash or partly in kind.
- So, going forward, the loan amount waived off in the hands of the any person will be taxed under section 28(iv) of the Act as a benefit or perquisite though the same is received in monetary form.