{"id":7973,"date":"2024-10-06T07:03:15","date_gmt":"2024-10-06T07:03:15","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=7973"},"modified":"2024-10-06T07:32:50","modified_gmt":"2024-10-06T07:32:50","slug":"section-194r","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/","title":{"rendered":"Guidelines on Section 194R of the Income Tax Act"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-7974\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/194R.png\" alt=\"194R\" width=\"967\" height=\"552\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/194R.png 837w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/194R-300x171.png 300w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/194R-768x439.png 768w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/194R-800x457.png 800w\" sizes=\"(max-width: 967px) 100vw, 967px\" \/><\/p>\n<p><strong>Introduction to Section 194R<\/strong><\/p>\n<p>Section 194R was introduced to streamline the deduction of Tax Deducted at Source on benefits or perquisites provided in the course of business or profession. This section mandates that any person providing a benefit or perquisite to a resident must deduct tax at a rate of 10% on the value of such benefit or perquisite. Section 194R of the Income Tax Act, addresses the deduction of tax at source on any benefit or perquisite provided to a resident arising from business or profession. Section 194R introduces a structured framework for the deduction of TDS on benefits or perquisites provided in the course of business or profession. Compliance requires careful identification, valuation, and timely deduction of TDS to avoid penalties and ensure adherence to the Income Tax Act. Businesses and professionals should familiarize themselves with the guidelines and integrate them into their financial processes. Below details for TDS on reimbursements to service providers under this section:<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69debd8adbfa3\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69debd8adbfa3\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Scope_Coverage_of_Section_194R\" title=\"Scope &amp; Coverage of Section 194R\">Scope &amp; Coverage of Section 194R<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#TDS_on_Reimbursements\" title=\"TDS on Reimbursements:\">TDS on Reimbursements:<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#TDS_on_Reimbursements-2\" title=\"TDS on Reimbursements\">TDS on Reimbursements<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Additional_Clarifications_Circular_No_182022_dated_13-09-2022\" title=\"Additional Clarifications (Circular No. 18\/2022, dated 13-09-2022):\">Additional Clarifications (Circular No. 18\/2022, dated 13-09-2022):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Valuation_of_Benefits_or_Perquisites\" title=\" Valuation of Benefits or Perquisites\"> Valuation of Benefits or Perquisites<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Specific_Considerations_for_Section_194R\" title=\" Specific Considerations for Section 194R\"> Specific Considerations for Section 194R<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Applicability_of_Section_194R_on_Lucky_Draw_Award_Money\" title=\"Applicability of Section 194R on Lucky Draw Award Money:\">Applicability of Section 194R on Lucky Draw Award Money:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Practical_Steps_for_Compliance_of_Section_194R\" title=\" Practical Steps for Compliance of\u00a0 Section 194R\"> Practical Steps for Compliance of\u00a0 Section 194R<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Frequently_Asked_Questions_on_section_194R\" title=\" Frequently Asked Questions on section 194R\"> Frequently Asked Questions on section 194R<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.caindelhiindia.com\/blog\/section-194r\/#Summary_Section_194R\" title=\"Summary Section 194R:\">Summary Section 194R:<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Scope_Coverage_of_Section_194R\"><\/span><span style=\"color: #000080;\"><strong>Scope &amp; Coverage of Section 194R<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Applicability:<\/strong><\/span>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Who is Covered? <\/strong><\/span>Applies to any person (deductor) providing benefits or perquisites to a resident (deductee) arising from business or profession. The section covers all benefits or perquisites, whether in cash or in kind, provided to a person, if these are part of their business or profession.<\/li>\n<li><span style=\"color: #000080;\"><strong>Types of Benefits or Perquisites:<\/strong><\/span>\n<ul>\n<li>Wholly in Cash<\/li>\n<li>Wholly in Kind<\/li>\n<li>Partly in Cash and Partly in Kind<\/li>\n<li>Capital Assets: Benefits can include capital assets like cars, land, etc.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Liability:<\/strong><\/span>\n<ul>\n<li>The deductor does not need to verify whether the benefit or perquisite is taxable in the recipient\u2019s hands.<\/li>\n<li>There is no requirement to check the taxability of the amount itself.<\/li>\n<li>Applies to benefits or perquisites paid or credited on or after July 1, 2022.<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Purpose of Section 194R: <\/strong><\/span>\n<ul>\n<li>It requires the deduction of tax at 10% on the value of any benefit or perquisite provided to a resident in the course of business or profession.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"TDS_on_Reimbursements\"><\/span><span style=\"color: #000080;\"><strong>TDS on Reimbursements:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol start=\"3\">\n<li><strong> TDS Rate u\/s 194R<\/strong><\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Standard Rate: 10% TDS on the total value of gifts or perquisites provided to a recipient during a FY.<\/li>\n<li>Threshold Limit: Tax Deducted at Source is applicable only if the total value exceeds INR 20,000 per recipient in a FY.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li><strong><span style=\"color: #000080;\">Invoice in the Name of the Recipient:<\/span> <\/strong>If the invoice for the expenses (such as travel or accommodation) is issued directly in the name of the service recipient, it is treated as the service recipient&#8217;s own expense. In this case, no Tax Deducted at Source is required u\/s 194R, as no benefit or perquisite has been provided by the service recipient to the service provider.<\/li>\n<li><strong><span style=\"color: #000080;\">No TDS u\/s 194R on Directly Invoiced Expenses:<\/span> <\/strong>If the reimbursement of expenses is billed directly to the service recipient (i.e., the invoice is made in the name of the service recipient), no TDS is required u\/s 194R as there is no benefit or perquisite being provided to the service provider.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"TDS_on_Reimbursements-2\"><\/span><span style=\"color: #000080;\"><strong>TDS on Reimbursements<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>As per Circular No. 12\/2022, if a person incurs expenses on behalf of another in the course of business or profession, it is considered a benefit or perquisite. Hence, Tax Deducted at Source at 10% applies on such reimbursements.\u00a0<strong>Examples:<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ol>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Travel Expenses: If a service provider incurs travel expenses while performing services and these are reimbursed by the recipient, TDS u\/s 194R is applicable on the reimbursed amount.<\/li>\n<li>Invoice in Recipient\u2019s Name: If the expense invoice (e.g., travel, accommodation) is issued directly in the name of the service recipient, it is treated as the recipient\u2019s own expense. No Tax Deducted at Source u\/s 194R is required.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n<ul>\n<li>\n<h3><span class=\"ez-toc-section\" id=\"Additional_Clarifications_Circular_No_182022_dated_13-09-2022\"><\/span><span style=\"color: #000080;\"><strong>Additional Clarifications (Circular No. 18\/2022, dated 13-09-2022):<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Consolidated Invoices: If reimbursement expenses are included in the same invoice as the primary service or goods, and TDS has been deducted under another section (e.g., 194C, 194J), no additional Tax Deducted at Source u\/s 194R is required.<\/li>\n<li>Directly Invoiced Expenses: No Tax Deducted at Source u\/s 194R if reimbursement expenses are billed directly to the recipient.<\/li>\n<li>This circular provided additional clarification regarding the application of Section 194R on reimbursements. If the expenses are already included in the invoice for services or goods (such as u\/s 194C or 194J), and Tax Deducted at Source has been deducted under those sections, there is no need for further TDS deduction u\/s 194R.<\/li>\n<li>Consolidated Invoice: If out-of-pocket expenses are included in the same invoice as the primary service or supply of goods, and TDS is deducted under another applicable section (e.g., Section 194C for contracts or Section 194J for professional services), no additional TDS is required u\/s 194R.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"6\">\n<li>\n<h3><span class=\"ez-toc-section\" id=\"Valuation_of_Benefits_or_Perquisites\"><\/span><span style=\"color: #000080;\"><strong> Valuation of Benefits or Perquisites<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Fair Market Value: The Fair Market Value of the benefit or perquisite is generally used for Tax Deducted at Source calculation.<\/li>\n<li>Exceptions:<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ol>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Purchased Benefits: If the provider purchased the benefit, the purchase price is used for Tax Deducted at Source.<\/li>\n<li>Manufactured Benefits: If the provider manufactures the benefit, the price charged to other customers is used for Tax Deducted at Source .<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Exclusions:<\/li>\n<li>GST is not included in the valuation for Tax Deducted at Source purposes.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"7\">\n<li>\n<h3><span class=\"ez-toc-section\" id=\"Specific_Considerations_for_Section_194R\"><\/span><span style=\"color: #000080;\"><strong> Specific Considerations for Section 194R<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/li>\n<\/ol>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Social Media Influencers:<\/strong><\/span>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Returned Products: No benefit; no Tax Deducted at Source u\/s 194R.<\/li>\n<li>Retained Products: Treated as a benefit or perquisite; Tax Deducted at Source applicable.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Reimbursement of Out-of-Pocket Expenses:<\/strong><\/span>\n<ul>\n<li>General Rule: If a person incurs expenses as part of their business and these are reimbursed, it is considered a benefit or perquisite. TDS at 10% applies.<\/li>\n<li>Exception: No TDS if travel bills are in the recipient\u2019s name, paid by the consultant, and reimbursed by the client.<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Dealers\u2019 Conferences:<\/strong><\/span>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Non-TDS Scenarios: Expenditure for dealer\/business conferences aimed at education, product launches, obtaining orders, teaching sales techniques, addressing queries, or reconciling accounts.<\/li>\n<li>TDS Applicable: If the conference includes incentives or benefits to select dealers\/customers based on targets, Tax Deducted at Source is applicable.<\/li>\n<li>Leisure Components: Expenses for leisure trips, sponsoring family members, priority stays, or overstays are liable for Tax Deducted at Source.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Benefits Provided to Employees of Recipient Entity:<\/strong><\/span>\n<ul>\n<li>Benefits to employees, directors, or their relatives who are not engaged in business or profession require TDS by the deductor. <strong>Example: <\/strong>A company provides free medicine samples to a doctor employed by a hospital. The company must deduct Tax Deducted at Source u\/s 194R in the hospital\u2019s name.<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Benefits Provided by Employer to Employees:<\/strong><\/span>\n<ul>\n<li>Treated as perquisites u\/s 17.<\/li>\n<li>TDS u\/s 192: Employers must deduct Tax Deducted at Source u\/s 192 for employee benefits and can claim credit by furnishing tax returns.<\/li>\n<\/ul>\n<\/li>\n<li><span style=\"color: #000080;\"><strong>Benefits Provided to Consultants:<\/strong><\/span>\n<ul>\n<li>Option 1: Deductor treats the entity as the beneficiary and deducts Tax Deducted at Source u\/s 194R. The entity can further deduct TDS for the consultant.<\/li>\n<li>Option 2: Deductor can directly deduct Tax Deducted at Source for the consultant.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"8\">\n<li><span style=\"color: #000080;\"><strong> Handling GST in Valuation<\/strong><\/span><\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Exclusion of GST: GST is not included in the valuation of benefits or perquisites for Tax Deducted at Source purposes u\/s 194R.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"9\">\n<li><span style=\"color: #000080;\"><strong> Managing TDS When Benefit Is in Kind or Partly in Kind<\/strong><\/span><\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li><strong>Insufficient Cash for TDS: <\/strong>If the benefit is in kind or partly in kind, and the cash component is insufficient to cover the 10% TDS, the deductor has two options:<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Advance Tax Payment by Recipient: The recipient pays the tax as advance tax. The deductor relies on the recipient\u2019s declaration and a copy of the advance tax challan.<\/li>\n<li>Grossing Up: The deductor deducts TDS by grossing up the benefit, treating the TDS as an additional benefit to the recipient.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ol start=\"10\">\n<li><span style=\"color: #000080;\"><strong> Computing the Rs. 20,000 Threshold<\/strong><\/span><\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Inclusion Period: Include benefits or perquisites provided on or before June 30, 2022, to assess the threshold for benefits provided on or after July 1, 2022.<\/li>\n<li>No TDS on Pre-July 1, 2022 Amounts: No TDS is required on amounts paid from April 1, 2022, to June 30, 2022.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Applicability_of_Section_194R_on_Lucky_Draw_Award_Money\"><\/span><span style=\"color: #000080;\">Applicability of Section 194R on Lucky Draw Award Money:<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Section 194R of the Income Tax Act, 1961, deals with the TDS on benefits or perquisites arising from business or profession. It covers both monetary and non-monetary benefits provided to a resident.<\/li>\n<li>Key Phrase \u2013 \u201cArising from Business or Profession\u201d: The applicability of Section 194R hinges on whether the benefit or perquisite arises in the course of business or the exercise of a profession. This is a critical factor for deciding if TDS should be deducted.<\/li>\n<li>Lucky Draw and Personal Achievements: If award money is provided for a personal reason such as winning a lucky draw or a personal achievement that is not related to the individual&#8217;s business or professional activities, it is not connected to business or profession.<\/li>\n<li>In such cases, the award does not fall under the ambit of Section 194R. Therefore, TDS would not be applicable under this section, as the benefit is purely personal and does not arise from a business or professional relationship. However, other sections, such as Section 194B (which deals with winnings from lotteries or games), may apply depending on the nature of the prize.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Practical_Steps_for_Compliance_of_Section_194R\"><\/span><span style=\"color: #000080;\"><strong> Practical Steps for Compliance of\u00a0 Section 194R<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Identify Benefits or Perquisites: Assess all benefits or perquisites provided to residents in the course of business or profession.<\/li>\n<li>Determine Valuation: Calculate the FMV or applicable purchase\/manufacture price, excluding GST.<\/li>\n<li>Check Threshold: Aggregate benefits per recipient for the FY &amp; Apply TDS only if the total exceeds Rs 20,000.<\/li>\n<li>Deduct TDS: Deduct 10% TDS on the value exceeding the threshold. Ensure proper documentation and compliance with procedural requirements.<\/li>\n<li>Deposit and Report: Deposit the deducted TDS with the government. Report the Tax Deducted at Source in the appropriate returns.<\/li>\n<li>Maintain Records: Keep detailed records of all benefits or perquisites provided and TDS deducted.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone  wp-image-7983\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/TDS-Section-194R-1.png\" alt=\"TDS-Section-194R-1\" width=\"918\" height=\"627\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/TDS-Section-194R-1.png 644w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/TDS-Section-194R-1-300x205.png 300w\" sizes=\"(max-width: 918px) 100vw, 918px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_on_section_194R\"><\/span><span style=\"color: #000080;\"><strong> Frequently Asked Questions on section 194R<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Do we need to check if this perquisite is taxable in the hands of the payee?<\/strong><\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">Answer: No. Tax Deducted at Source must be deducted irrespective of the taxability of the benefit or perquisite in the recipient\u2019s hands. All benefits provided in the course of business or profession are deemed taxable.<\/p>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Should we deduct TDS on discounts or offers given to our customers?<\/strong><\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">Answer: No. Sales discounts, cash discounts, rebates, and similar offers do not attract TDS u\/s 194R. However, free samples provided to customers are subject to Tax Deducted at Source.<\/p>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Can the recipient claim depreciation on the asset received as a benefit?<\/strong><\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">Answer: Yes. The recipient can claim depreciation based on the fair market value (excluding GST) of the asset, on which taxes have been paid.<\/p>\n<ul>\n<li><span style=\"color: #000080;\"><strong>Is TDS applicable on cash discounts?<\/strong><\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">Answer: No. Cash discounts, rebates, and similar offers are excluded from Section 194R. Only benefits or incentives other than discounts or rebates (e.g., cars, electronics) attract TDS.<\/p>\n<ul>\n<li><strong><span style=\"color: #000080;\">Does a company manufacturing capital goods need to deduct Tax Deducted at Source u\/s 194R on 2-year free maintenance services provided to the buyer?<\/span><\/strong><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">Answer: No. Section 194R applies only when an actual benefit or perquisite is provided, not merely for providing maintenance services unless such services constitute a perquisite or benefit as defined under the Act.<\/p>\n<ul>\n<li><span style=\"color: #000080;\"><strong>How should the valuation of benefit or perquisite be carried out?<\/strong><\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 40px;\">Answer:<\/p>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Purchased Benefits: Use the purchase price.<\/li>\n<li>Manufactured Benefits: Use the price charged to other customers.<\/li>\n<li>Exclude GST from the valuation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Summary_Section_194R\"><\/span><span style=\"color: #000080;\"><strong>Summary Section 194R:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-7981\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/TDS-Section-194R.png\" alt=\"TDS-Section-194R.\" width=\"973\" height=\"702\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/TDS-Section-194R.png 617w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2024\/10\/TDS-Section-194R-300x216.png 300w\" sizes=\"(max-width: 973px) 100vw, 973px\" \/><\/p>\n<ul>\n<li>TDS at 10% u\/s 194R applies when a service provider incurs expenses and those are reimbursed by the recipient, as it constitutes a benefit or perquisite.<\/li>\n<li><span style=\"color: #000080;\"><strong>No Tax Deducted at Source u\/s 194R if:<\/strong><\/span>\n<ul>\n<li>The expense invoice is in the recipient\u2019s name (i.e., it is their liability directly).<\/li>\n<li>Reimbursement expenses are included in the same invoice as the service or goods provided, and Tax Deducted at Source has already been deducted under another section (e.g., 194C or 194J).<\/li>\n<\/ul>\n<\/li>\n<li>The provider of the benefit does not need to ascertain if the amount is taxable u\/s 28(iv) before deducting Tax Deducted at Source.<\/li>\n<li>Section applies even if the benefit is in cash or partially in kind.<\/li>\n<li>TDS applies even if the benefit is in the form of a capital asset.<\/li>\n<li>Sales discounts, cash discounts, and rebates are not considered benefits under this section.<\/li>\n<li>The valuation of benefits should be done based on the fair market value of the perquisite provided.<\/li>\n<li>Social media influencers provided with products to promote on social platforms are considered to have received a benefit.<\/li>\n<li>Reimbursement of out-of-pocket expenses is not considered a benefit.<\/li>\n<li>Dealer conferences for educating dealers about products are not considered benefits if they are purely educational and do not involve any leisure or recreational elements.<\/li>\n<li>If the benefit is in kind and there is no cash available for Tax Deducted at Source, the provider must ensure that Tax Deducted at Source has been deposited before releasing the benefit.<\/li>\n<li>Threshold is calculated for the entire financial year, including transactions before and after 1st July 2022, when the section became applicable.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Introduction to Section 194R Section 194R was introduced to streamline the deduction of Tax Deducted at Source on benefits or perquisites provided in the course of business or profession. This section mandates that any person providing a benefit or perquisite to a resident must deduct tax at a rate of 10% on the value of &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[100],"tags":[1114],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/7973"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=7973"}],"version-history":[{"count":5,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/7973\/revisions"}],"predecessor-version":[{"id":7976,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/7973\/revisions\/7976"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=7973"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=7973"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=7973"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}