Finance Act 2022 inserted a new section 194R in the Income-tax Act, 1961 with effect from 1st July 2022. 

Below are the summary of this section:

–  TDS u/s 194R is effect from 1 st July, 2022.

–  TDS u/s 194R is to be deducted on any benefit or perquisite provided to resident, whether convertible into money or not, arising from business or the exercise of a profession by such resident

–  TDS u/s 194R shall be deducted before providing such benefit or perquisite, as the case may be, to such resident

–  TDS u/s 194R Shall be deducted @ 10% of the value or aggregate of value of such benefit or perquisite:

–  Where the benefit or perquisite, as the case may be, is wholly in kind or partly in cash and partly in kind but such part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such benefit or perquisite u/s 194R, the person responsible for providing such benefit or perquisite shall, before releasing the benefit or perquisite, ensure that tax has been paid in respect of the benefit or perquisite:

–  No TDS u/s 194R to be deducted if the value or aggregate value of the benefit or perquisite paid or likely to be paid to a resident does not exceed Rs 20,000/- during the financial year

–  TDS u/s 194R  shall not apply to an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed Rs 1 Crore in case of business or Rs 50 Lakh 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

Some examples of common perquisites/ benefits are:

–  Travel packages

–  Gift Cards/vouchers

–  Products under incentive scheme – Gold Coins/ Vehicles/ phones etc

–  Usage of business assets etc.

Refer Circular No 12 of 2022 dated 16 June, 2022 for more clarification on this section.