Sec.194R-deduction of tax on benefit/perquisite pertaining to Business/Profession

Why the section was introduced:

Ministry of finance noticed the Revenue Leakage in providing Benefits/perquisites.

Rate: 10%

Threshold Limit: Rs 20,000[i.e., deduct only when exceeds 20000]

Who has to deduct(deductor):

  • Other than Individual/HUF
  • Individual/HUF whose sales/gross receipts/TO > 1cr (Business) or >50 Lakhs (Profession) in the immediately preceding financial year.

For whom to deduct(deductee):

Who is getting the benefit/perquisite (applicable only for Resident Assesse)

When to deduct: Before releasing benefit/perquisite

Other Points:

  • Benefit/Perquisite can be in the form of cash or kind or part thereof.
  • Sec. is applicable irrespective of whether the benefit/perquisite is contractual/gratuitous
  • Waiver of Loan is not benefit or perquisite
  • Purchase of shares as an investment with lock in period of holding, for consideration less than Market value – Not a benefit/perquisite
  • Vehicle provided to director of a company for free use-Perquisite value to be determined as per Rule 3 [talks about determination of value of perquisites given to employee under the head salaries] even though he/she is not an employee of the company.
  • With the introduction of this section, we can say that taxability of Benefit/Perquisite is not only restricted to employees but also taxable in the hands of Business/Profession too.