Section 194R-TDS on Benefits and Perquisites

Section 194R-TDS on benefits and perquisites provided

Quick guide on Section 194R – TDS on benefits and Perquisites provided. How Section 194R is going to affect practicing doctors and Social media influencers.

A new TDS section 194R introduced in the Budget, 2022 shall be applicable from 1st July 2022. It requires the deduction of 10% by any person (resident or non-resident) who provides benefit or perquisite to a resident person in a year exceeding Rs 20,000.

In other words, after the threshold limit, [email protected]% shall be deducted under section 194R.

Meaning of Benefit and Perquisite under section 194R

As per the Income Tax Act, the meaning of benefit and perquisite u/s 194R includes:

  • Any benefit given by a person to a Resident as a freebie to endorse the brand. (like mobile phones, laptops, TV, headphones,  etc.,)
  • The benefit or perquisite may be partly in cash and partly in kind or
  • The benefit or perquisite may be fully in kind.
  • This also includes a free sponsorship, free air ticket, and 
  • Free tickets for an event like IPL cricket matches, IIFA Award nights, etc.,
  • Free medicine samples to Medical practitioners /doctors
  • Sponsored holiday trip

These are only the indicative list and not an exhaustive list of benefits and perquisites.

Valuation of Benefit or Perquisite under 194R

TDS under section 194R shall be deducted on Fair Market Value (FMV).

In case the deductor has purchased the benefit/perquisite then the value shall be the Purchase price (Actual cost).

If the deductor manufactures such an item then the price that it charges to its customers for such item shall be the value for such benefit/perquisite.

How to calculate threshold limit for section 194R?

Section 194R will be applicable if the value of the benefit or the perquisite exceeds Rs 20,000 during the year (including the period 1st April 2022 to 30th June 2022).

The benefits provider shall deduct TDS under the said section on the benefits or perquisites provided on or after 1st July 2022.

Is GST considered in the valuation?

No, GST is not considered in the valuation for TDS u/s 194R. TDS should be deducted on value excluding goods and services tax.

How is the tax deducted on the perquisites?

  • Any benefit received in kind, then the deductor has to ensure that an advance tax is paid by the recipient of the benefit. Or
  • Person who provides the benefits shall deduct TDS under 194R for the value of the benefit.

Section 194R-Applicability Of TDS On Practicing Doctors

How New TDS Rule: Section 194R to affect Doctors and Social Media Influencers

Section 194R will apply on distribution of free samples to the medical practitioners (doctors). Therefore, if you are a pharma company and giving samples to any medical practitioners, you have to deduct tds as per section 194R.

चिकित्सकों (डॉक्टरों) को नि:शुल्क नमूने बांटे जाने पर धारा 194आर लागू होगी। इसलिए, यदि आप एक फार्मा कंपनी हैं और किसी मेडिकल प्रैक्टिशनर को सैंपल दे रहे हैं, तो आपको धारा 194R के अनुसार टीडीएस काटना होगा।

Applicability Of TDS On employed Doctors

CBDT has clarified that if doctors receive free samples of medicines while employed, Section 194R will apply to the distribution of free samples to the hospital.

The hospital, as an employer, could consider such samples as a taxable perquisite for employed doctors and deduct tax accordingly.

TDS on Social Media Influencer – Youtuber

W.e.f 1st July 2022, tds under section 194R shall apply on social media influencer.

If you are a Social Media Influencer on YouTube, Instagram, Facebook etc., will have to pay Tax at source (TDS) if they receive any benefit or perquisite (such as mobile Phone, TV, laptop etc.,) from any brand owner or company to promote or review their brand on their social media account.

सोशल मीडिया इन्फ्लुएंसर को अपने सोशल मीडिया अकाउंट जैसे की यूट्यूब, इंस्टाग्राम, फेसबुक आदि पर किसी ब्रांड का प्रचार करने पर स्रोत पर कर (TDS) देना होगा।

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