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All About Section 194R - TDS on benefits or perquisite provided | Applicable Date | TDS Rate | FAQs

In this article we'll see what is Applicability Date of 194R, TDS rate of 194R, FAQs on 194R, Cases where 194R not apply

A. Who is liable to deduct tax under Section 194R?

Any person providing directly or Indirectly any benefit or perquisite,
Whether in money or in kind
Required to ensure that the tax required to be deducted has been deducted under Section 194R.

Deductor Type

The deductor can be a resident person or a non-resident person.

Applicable Date

Provision of this sections is applicable with effect from 01-07-2022.
Thus, the benefit or perquisite which has been provided on or before 30-06-2022, would not be subjected to tax deduction under this section. | Section 194R

Section 194R Not Applicable on under mentioned cases:

1. Specified Individuals and HUF: This section shall not apply to an individual or a HUF having total sales, gross receipts or turnover upto Rs. 1 crore in case of business or Rs. 50 lakhs in case of the profession during the F.Y. immediately preceding the F.Y. in which such benefit or perquisite, is provided by such person.
2. Value threshold: No TDS if the value of benefit or perquisite does not cross the threshold limit of Rs. 20,000
3. Employer-employee: Employer-employee relationship exists, TDS under Section 192;
4. Non-resident: Recipient is a non-resident, TDS under Section 195;
5. No Business Connection: Benefits/perquisites do not have a connection with the business/profession of the resident recipient/deductee
6. B2C: Benefits or perquisites provided to customers who does not engage in business/profession.

B. What is meant by ‘person responsible for providing’ benefit or perquisite?

It means the person providing directly or Indirectly any benefit or perquisite (Actual director of the movie)
Clasic example: Company will be deducting on the Benefit of Tour package given to Dealers, Deductor: Company, Deductee: Dealers

C. When is tax deducted under Section 194R

1.When person get entitled to benefits under contract
2.While providing the benefit (Actually handing over the Benefit)

This would be the professional call to decide whether to deposit the tax on the day party become entitled for the benefit or the day when benefit is transferred.

D.What is the rate of TDS under section 194R

1.Normal Case: Rate is 10% of the value or aggregate of the value of ‘such benefit or perquisite'.
2.No surcharge and health & education cess to be added.
3.No PAN: section 206AA got attracted and rate would be higher of (A) Rate or rates in force or (B) 20%
4.Non-filers of Income Tax: section 206AB got attracted and rate would be (A) Rate or rates in force or (B) 20%
5.Where No PAN & No Return: Higher of rate specified in 206AA or 206AB
6.No LDC: Deductee cannot apply for a certificate of lower deduction or nil deduction under this section
7.No Form 15G or 15H: Deductee cannot provide self-declaration for non-deduction of tax under 15G or 15H

E. What is the threshold limit for TDS under Section 194R?

Value or aggregate of the value of the benefit/perquisite provided or likely to be provided during the financial year exceeds Rs. 20,000
and Tax is deducted on entrie value including Rs.20000.

Though provisions are applicable from 01-07-2022, the benefits provided from 01-04-2022 to 30-06-2022 will be counted for crossing the threshold.
but no tax will be deducted on the benefits provided from 01-04-2022 to 30-06-2022.

F. How to deduct tax from benefit or perquisite?

The liability may be discharged by:
1.Grossing up: “payer” by grossing up and paying tax out of his pocket; (Why grossing up: TDS 194R deposited by payer on payee behalf is also kind of benefit)
2.Advance Tax of Payee: “payee” himself pays tax and gives challan to the payer.
3A.Normal Deduction: Debiting the amount of TDS to the account of the payee, and pays the benefit net of tax
3A.Normal Deduction: Debiting the amount of TDS to the account of the payee, and receive the tax amount in "Cash form" from payee.

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