The Central Board of Direct Taxes in its guidelines issued for these new rules has notified that those who receive benefits will have to pay TDS at the rate of 10 per cent under the new tax rules. The tax board said that these perquisites may either be in cash, in kind or partly in both of these two means. Finance Act 2022 inserted a new section 194R in the Income-tax Act, 1961, which was notified during the Budget speech of finance minister Nirmala Sitharaman earlier this year. The new section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source at 10 per cent of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite.
Under the new rule, social media influencers will be liable to pay 10 per cent TDS if they receive a product like car, mobile, outfit, cosmetics etc and retain the same. However, if the product is returned to the company after using the services, it will not fall under Section 194R.
The CBDT further said that the Section 194R will be applicable on distribution of free samples to by a company to a doctor who is an employee of a hospital. The tax will be deducted by the company in the hands of hospital as the benefit/perquisite is provided to the doctor on account of him being the employee of the hospital.
The guidelines also mentioned that Section 194R shall apply to seller giving incentives, apart from rebates or discounts, which include items in cash or kind. Some of these are car, TV, computers, gold coin, mobile phones, sponsored trips to family, free tickets and free medical samples.
This deduction is not required to be made, if the value or aggregate of value of the benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed Rs 20,000, the CBDT clarified.