Finance Ministry to clarify doubts on applicability of TDS on perks received in business, profession

The finance ministry will clarify doubts on the applicability of new TDS provision regarding benefits or perquisites received in a business or profession, a senior tax official said on Wednesday.

Joint Secretary in the finance ministry Kamlesh C Varshney said that such benefits and perquisites are income and were always taxable whether received in cash or kind.

The Budget 2022-23 brought in the provision of tax deducted at source (TDS) on such income to check tax revenue leakage. The Budget brought in a new section, 194R in the I-T Act which requires deduction of tax at source at the rate of 10 per cent, by any person, providing any benefit or perquisite, exceeding Rs 20,000 in a year to a resident, arising from the business or profession of such resident.

The new provision comes into effect from July 1. "This (benefits and perquisites) is one area where nobody was paying taxes despite receiving benefits and perquisites in the course of business and profession... There is definitely a leakage here and therefore this section 194R. Whatever are the doubts, we are going to clarify the practical difficulties before July 1," Varshney said while interacting with the members of industry chamber Assocham.