194R- TDS Clarifications on Perquisites & Additional Guidelines by CBDT


The CBDT has released a new Circular No. 18 of 2022, which clarifies the problem of TDS on Perquisites under Section 194R of the Income Tax Act.

On September 13, the Central Board of Direct Taxes released a circular about the removal of obstacles in Section 194R, which requires the person responsible for delivering any benefit or perquisite to a resident to deduct 10% tax at source.

Previously, the Finance Act 2022 added a new section 194R to the Income-tax Act of 1961, which took effect on July 1, 2022.

This Section of the Finance Act 2022 requires a person to deduct tax at a source equal to 10% of the value or aggregate of the value of such benefit or perquisite before delivering such benefit or perquisite. Though the advantage or perquisite may or may not be convertible into money, it must result from such a resident conducting business or exercising a vocation.


The circular copy is as follows:


The following are some clarifications:

1. It is specified that one-time loan settlements with borrowers or loan waivers issued as part of a settlement with borrowers by the following would not be subject to tax deduction at source under section 194R.

 2. Any amount expended by a “pure agent” as defined in the GST Valuation Rules and reimbursed by the recipient would not be considered a benefit/prerequisite for the purposes of section 194R of the Act.


Read More: Can I opt for quarterly GST returns instead of monthly returns?


3. If out-of-pocket expenses (reimbursement) are already part of the consideration in the bill on which tax is deducted under the relevant sections of the Act, other than section 194R, it is clarified that there will be no additional liability for tax deduction under section 194R of the Act.

4. Section 194R does not apply to any benefit or perquisite offered by an embassy.

5. Tax is not required to be deducted when a corporation issues bonuses or right shares in which the public has a strong interest.