194R TDS applies if any benefits or perquisites given in a business or profession, whether in cash or kind.
Who is responsible for tax deduction u/s 194R?
Deductor
- Individuals
- HUF
- Companies or entities
Deductee
Receiver of benefit i.e., resident assessee.
Examples of benefits or perquisites
- Expenditure on family trip accompying the person on business conference trip.
- Incentives in the form of cash or kind such as gold coins, mobile phones, TV etc.
- Free medicine samples provided by a company to a doctor.
- Expenses attributable to leisure trip or leisure component, even if it is incidental to the dealer or business conference.
When TDS u/s 194R is applicable?
TDS u/s 194R is applicable if the value of benefits or perquisites whether in cash or kind is more than Rs. 20,000 in a financial year.
Non Applicability of provision of Section 194R
- Benefits received by employees
- Receipient is a non resident
- No business relationship
- Value of benefits is less than Rs. 20,000 in a year
- Turnover in case of business is less than 1 Crore and in profession less than 50 lakh
- Cash discount, sales discount or rebate
- Gift on festival or marriage ceremony
Rate of TDS
10% (20% in case of no PAN).
Time to Deduct TDS
TDS must be deducted before providing benefits or perquisites to deductee.
How is the valution of benefit/perquisite require to be carried out?
The valuation will be based on the FMV of benefits or perquisites except in the following cases:
- The benefit/perquisite provider has purchased the benefit/perquisite before providing it to the receipient . In that case, the purchase price shall be the value of such benefit/prequisite.
- The benefit/perquisite provider manufactures such items given as benefit/perquisite, then the price that is charged to its customers for such items shall be the value of such benefit or perquisite.
It is further clarified that GST will not be included for the purpose of valuation of benefit/perquisite for TDS under section 194R of the Act.
FAQs
Section 194R applies to domestic transactions, with a 10% TDS rate on benefits when amount exceeds Rs. 20,000 in a year. On the other hand Section 195 applies to payments made to non-resident Indians.
Section 194R does not apply when there is an employer-employee relationship or allowances are received by a non-resident Indian.
The TDS rate under Section 194R for reimbursements exceeding Rs. 20,000 is 10%.