The Central Board of Direct Taxes has issued a circular for removal of difficulties under Section 194R, which mandates a person who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source at the rate of 100 per cent. 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 CBDT had earlier in June sounded new guidelines under Section 194R.
CBDT issues Circular No. 18 dt 13/09/2022 containing additional guidelines to remove difficulties wrt Section 194R, which came into effect from 1st July, 2022. This Circular is in continuation of Circular No. 12 issued earlier on 16/06/2022.
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As per the Finance Act 2022, the new Section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source at the rate of 10 per cent of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite. The benefit or perquisite mayor may not be convertible into money but should arise either from carrying out of business, or from exercising a profession, by such resident.
Other than this, a 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, said the CBDT.
“The responsibility of tax deduction also does not apply to a person, being an
Individual/Hindu Undivided Family (HUF) deductor, whose total sales / gross
receipts / gross turnover from business does not exceed one crore rupees, or
from profession does not exceed fifty lakh rupees, during the financial year
immediately preceding the financial year In which such benefit or perquisite
is provided by him,” said the CBDT.
The tax department also made it clear that the circular was issued for only removing difficulties in the implementation of provisions of section 194R of the Act and it does not not impact the taxability of income in the hands of the recipient which shall be governed by the relevant provisions of the Act.
In June too, the CBDT had issued guidelines in the form of the circular number 12 of 2022 in exercise of the power conferred by sub-section (2) of section 194R of the Act. This circular is also issued under the same sub-section to provide further clarity on the rules.
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