The government, in the Finance Act, of 2022, made a new section 194R to the Income Tax Act, of 1961. It makes it compulsory for resident Indians to furnish a 10% tax on the advantages obtained through them.
A resident Indian who received any advantage needs to pay the 10% tax at source on the value of advantage as mandated by section 194R under TDS. For extending the tax base and diminishing tax evasion in the country the same section would have been made by the government. Various related concerns have been stated by the experts.
Any Exceptions Regarding the Act?
The section does not apply when the value of the advantage furnished is below Rs 20,000. The same would not be applied to the Individual or HUF who secures a turnover of not more than Rs 1 cr for the business or Rs 50 lakh for the professional in the former year where the advantage was delivered.
What Makes the Experts Feel Mysterious?
The limit mentioned in section 194R does not sync with the limit mentioned in section 56. Under section 56 when the receipt of the advantage through the individual or a Hindu Undivided Family (HUF) is more than Rs 50,000 in a year, they would liable to furnish the tax on the same. But under section 194R the threshold would be Rs 20,000. As per the experts, the same will be directed to the tax outflow that would actually be exempted in the hands of the recipient.
The term advantage would not be described in the act. In the before times the government would have mentioned that the receipt might be in the form of cash, however, no precise definition was given. The same was directed to the other administrative challenges.
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The exact valuation of the advantage in kind would be difficult to compute and the same would make the complaints more cumbersome. The act would draw the samples obtained via doctors and travel and the additional advantages obtained through the influencers beneath its boundary.
What Could an Assessee do if both Sections 194R and 56 Apply?
Tax experts mentioned that because of no clear guidelines then they should pay the higher tax and claim the refund later via ITR. But the government would not yet provide any clarification on these issues.
