TDS Rule: From July 1, the new rule of Tax Deducted at Source (TDS) is being implemented. The new rule will apply to the business of sales promotion. It will have a significant impact on social media influencers and doctors.
The new TDS rule has been released by the Central Board of Direct Taxes (CBDT). To combat income leakage, the Union Budget included a new clause, 194R, to the Income Tax Act of 1961.
The rewards, according to Kamlesh C Varshney, Joint Secretary in the Finance Ministry, include free medicine samples for doctors, overseas travel tickets, or free Indian Premier League tickets. League (IPL) tickets while on business and much more. Varshney underlined the importance of disclosing this while submitting tax returns.
What did CBDT say?
According to the Central Board of Direct Taxes (CBDT), the payer/deductor is not required to do taxation checks on the amount in the payee’s hands. Furthermore, the type of item provided as an additional advantage is irrelevant. Section 194R covers even capital assets given as a profit.
In addition, dealers who offer incentives other than discounts or refunds are subject to section 194R. This discount can be in the form of cash or items like a car, TV, computer, gold coin, mobile phone, free ticket, etc.
The CBDT confirms that section 194R will apply if doctors working in hospitals receive free pharmaceutical samples. As an employer, the hospital can classify such a sample as a taxable perk for its employees and deduct tax under section 192.
Whereas, for doctors working as consultants in a hospital and receiving free samples, TDS would ideally be applicable in the first hospital, which would require a deduction of tax under section 194R in respect of consultant doctors.
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