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Income Tax--TDS

Deduction of Tax on Benefit or Perquisite in Respect of Business or Profession

CA. Manoj Gupta

The Finance Act, 2022 has inserted a new Section 194R in the Act from 1-7-2022 so as to provide for tax deduction in respect of any benefit or perquisites provided to a resident by any person. The learned author illustrates and explains the amendment and also discusses the contents of recent CBDT clarification on the same.

1. Introduction

As per clause (iv) of Section 28 of the Act, the value of any benefit or perquisite, whether convertible into money or not, arising from business or exercise of profession is to be charged as business income in the hands of the recipient of such benefit or perquisite. However, in many cases, such recipient does not report the receipt of benefits in their return of income, leading to furnishing of incorrect particulars of income.

Accordingly, in order to widen and deepen the tax base, a new Section 194R has been inserted in the Act from 1-4-2022 to provide that the person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of a business or exercising of a profession by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite. For the purpose of this section, the expression 'person responsible for providing' has been defined to mean a person providing such benefit or perquisite or in case of a company, the company itself including the principal officer thereof.

2. Who is liable to deduct tax

Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident is liable to deduct tax.

However, it is provided that in case of a person being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person there shall be no need to deduct tax at source.

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