TDS on Benefit or Perquisite from Business or Profession
Introduction
Section 194R provides that TDS must be deducted at 10% on any benefit or perquisite provided to a resident in relation to business or profession. The tax must be deducted before providing the benefit or perquisite.
Key Provisions
- Deductor:Any person (resident or non-resident) providing a benefit or perquisite related to business or profession.
o These provisions are not applicable to individuals and HUFs with turnover below Rs. 1 crore (business) or Rs. 50 lakh (profession) in the previous year.
- Deductee:Resident persons receiving benefits or perquisites related to their business or profession.
- Exemptions:
- Threshold:TDS applies only if the total benefit/perquisite exceeds Rs. 20,000 in a financial year.
- Time of Deduction:Before providing the benefit or perquisite.
Rate of TDS
- 10% on the value of the benefit or perquisite.
- Higher rates apply if PAN is not provided (Section 206AA)
Valuation of Benefit/Perquisite
- Fair Market Value (FMV), unless:
o The benefit is purchased (then the purchase price applies).
o The benefit is manufactured (then the selling price applies).
Special Cases
- If benefit is given in kind:
o The recipient must pay the TDS amount in advance or
o The provider must gross up the value and pay the TDS.
CBDT Guidelines
The CBDT has issued guidelines, vide Circular No. 12, dated 16-06-2022 and Circular No. 18, dated 13-09-2022, to address various difficulties and clarify several doubts.
Compliance Requirements
- Lower/Nil Deduction Certificate:Not available under Section 197.
- Deposit of TDS:
o Challan ITNS 281 within 7 days from the end of the deduction month.
o For March deductions, deposit by 30th April.
o Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statement Filing:Quarterly submission in Form 26Q.
- TDS Certificate:Form 16A must be issued within 15 days from the due date of TDS statement filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Interest liability under Section 201.
o Penalty under Section 271C (up to the non-deducted amount).
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Rs. 200 per day penalty under Section 234E (limited to TDS amount).
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Penalty under Section 272A.