Section 194R has been inserted in the Income Tax Act, 1961 in Finance Act, 2022.

This section was come into effect from 01.07.2022.

This new section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @10% of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business, or from exercising a profession, by such resident.

Rate of TDS: Rate of TDS under this section is 10%.

Non Applicability of Section 194R:

1. If value of perquisites does not exceed Rs. 20,000 in a financial year.
2. Not applicable for individuals or HUF if in the immediate preceding financial year total sales do not exceed Rs. 1 Crore in case of business and Rs. 50 Lakhs in case of profession.
3. In case of reimbursement of expenses.
4. If an employer-employee relationship exists, Perquisites under Salary Head given by a company to its Directors and Employees as the tax shall be deducted under Section 192.
5. If the recipient is a non-resident, the tax shall be deducted under Section 195
6. If the benefits or perquisites do not have a connection with the business or profession of the resident recipient/deductee.
7. If benefits or perquisites are provided to a customer who does not engage in business or exercise of a profession.
8. No tax is required to be deducted under Section 194R of the Act on sales discount, cash discount and rebates allowed to customers.