Section 194R shall also apply to sellers who are offering benefits other than discounts, even if not in cash, such as cars, TVs, computers, gold coins, or mobile phones.
The rules for deducting tax at source (TDS) on profit from business done for sales promotion are going to change from July 1 and now these rules will be applicable to social media influencers and doctors as well. The Central Board of Direct Taxes (CBDT) has issued guidelines regarding the implementation of these new provisions.
This provision was imposed on such income in the Union Budget to prevent leakage of tax revenue and for this, a new section 194R was added in the Income Tax Act, 1961. Under this, a provision of 10 percent TDS was kept. Any person who gives the benefit of more than Rs 20,000 annually to any citizen.
What comes under profit…?
Kamlesh C. Varshney, Joint Secretary in the Ministry of Finance explained these benefits and said that it includes free samples of medicines available to doctors or free foreign travel tickets during any business and free Indian Premier League (IPL) tickets. will also be involved.
According to Kamlesh Varshney, all these have to be mentioned in the filing of income tax returns, and given the fact that these have not been sold, they cannot be sidelined.
Section 194R shall also apply to sellers who are offering benefits other than discounts, even if not in cash, such as cars, TVs, computers, gold coins or mobile phones.
If a doctor is working in a hospital…?
The Central Board of Direct Taxes has clarified that Section 194R will be applicable in cases of doctors working in hospitals who receive free samples of medicines when they distribute free samples available from the hospital. The hospital, as an employer, will treat those samples as a taxable facility (prerequisite) and deduct tax under section 192. In such cases, a limit of Rs 20,000 for hospitalization will be considered.
For Doctors who are working as consultants in a hospital, and getting free samples, TDS ideally would be applied in the hospital first, and then they would have to deduct tax from the consultant doctor under section 194R.
What discount is being given…?
As per CBDT, section 194R will not apply if prerequisite/facilitation is provided to a government institution like a government hospital, which is not carrying on business or profession.
The Customer is exempted from any sales discount, cash discount, or any other form of discount, and these are excluded from the purview of section 194R, as their inclusion may cause difficulties for the Seller.
Further, if benefits such as mobile phones are returned to the producer company after the use of the services (in the case of Social Media Influencers), they will also be kept out of the purview of the new provisions.
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