TDS on Prerequisites or Benefits in Business (Sec 194 R)

TDS on Prerequisites or Benefits in Business (Sec 194 R)

Posted by CA Pankaj Kumar Vats
In: Taxation
On 21 Dec 2022

Section 194R
Deduction of tax on benefit or perquisite in respect of business or profession

Who Should Deduct the TDS?
The Person/Business/Company, who is giving benefit or perquisite to any other person, in relation to the business

When TDS Needed to be deducted? 
At the time of providing benefit or perquisite 

Cash or Kind?
The Benefit or perquisite may be in cash or in kind

What is the threshold of minimum benefit or perquisite?
The minimum threshold limit is Rs. 20,000/-

Rate of TDS?
The Rate of TDS is 10%

Let us understand it by way of a case study:
Mr. X is running the business of wholesale supply of Washing machines.

Mr. Y is the distributor, purchasing machines from Mr. X

Mr. X commits to Mr. Y, that if makes sales of 1000 Units of Washing machines, in that case, Mr. X will arrange a travel package for Mr. Y

Mr. Y archives the Target of selling 1000 Units

Thus Mr. X arranges the travel package for Mr. Y

The Cost of the Travel Package is Rs. 1,00,000/-

So here in the above case study, let us examine the TDS liability as per Section 194R

Mr. X should deposit the TDS @ 10% on Rs. 1,00,000/- and should declare in his TDS Return.

This TDS deducted will be shown in Form 26AS of Mr. Y

Two more questions are there in above cases, and it is as follows:-

  1. The Travel Package received by Mr. Y. Is it his Income? Is he liable to pay tax on it?
    Yes it is Income for Mr. Y and tax is payable on it 
  2. Is this Travel Package Income is taxable Under GST in the hand of Mr. Y?
    Ideally, it should attract GST because it is not covered by the negative listed items in GST. However, it is believed that IT Department or GST Department will issue a guidance note on this. 

Key Takeaways from Section 194R
It is not only limited to the deduction of TDS but raises the question of taxability in Income Tax and GST both.

The business should see it very carefully while making GST Filings and Income Tax Filings

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