The Central Board of Direct Taxes (CBDT) has provided the guidelines asking to address the problems that arise from the application of the latest section 194R of the income tax act for withholding 10% tax (TDS) on the advantages or perquisites from non-salary sources.
The latest provision portion of the finance act 2022 would come into force from July 1.
As per the rules, the same would not be important for the payer or deductor to verify the taxability of the sum in the payee’s hands prior to deducting TDS via clearly differentiating the laws of controlling TDS beneath section 195 via TDS under section 194R.
Under section 194R the advantage covered would be either in cash or in the kind or partly in cash and partly in kind. The kind of asset provided is not related and the capital assets provided as an advantage come under section 194R. Central Board of Direct Taxes (CBDT) secures the phrases of whatever kind of advantage towards fastening TDS liability on the payer.
CBDT is used to provide the relaxation on the sales discount, cash discount, and exemptions permitted to the customer. Section 194R would be applied to the seller providing the incentives additionally than the exemptions, which are sort of cash or kind for example car, TV, computers, gold coin, mobile phone, sponsored trip, free ticket, medicine samples to medical practitioners.
“The guidelines have been issued in time considering the section is effective from 1 July and seeks to provide clarity on multiple fronts. Certain aspects, particularly applicability of withholding tax on reimbursement of OPEs, benefits provided in cases of the recipient not engaged in business or profession etc. could open up a host of practical issues which taxpayers should brace themselves with,” mentioned the tax expert.
