As of July 1 this year, doctors, influencers and other people who receive free items from companies will have to pay taxes to receive them, the Income Tax Department has stated. The Central Council for Direct Taxes has stated in its guidelines for these new rules that under the new tax rules those who receive benefits must pay TDS at the rate of 10 percent. The tax authorities said these benefits could be either in cash, in kind, or partially in both means. Finance Act 2022 added a new section 194R to the Income-tax Act, 1961, which was announced earlier this year during the budget speech of Finance Minister Nirmala Sitharaman.
“The new section requires a person responsible for providing a benefit or compensation to a resident to withhold tax at source against 10 percent of the value or the aggregate value of such compensation or compensation before such compensation or reimbursement,” the CBDT said in its June 16 message.
“The proposed new section provides that the person responsible for providing to a resident of any benefit or consideration, whether or not exchangeable for cash, arising out of such resident’s business or the exercise of a profession, before receiving such benefit or compensation, as the case may be, to such resident, cause tax at the rate of ten per cent to be withheld in respect of such benefit or condition. of the value or the aggregate of the value of such benefit or benefit,” the section reads.
Under the new rule, social media influencers are required to pay 10 percent TDS if they receive a product such as car, mobile, outfit, cosmetics, etc. and keep the same. However, if the product is returned to the company after using the services, it will not be subject to section 194R.
The CBDT further said that Section 194R will apply to a company’s distribution of free samples to a physician who is an employee of a hospital. The tax is withheld by the hospital owned company as the benefit is paid to the doctor because he is the hospital employee.
The guidelines also stated that Section 194R applies to the provision of incentives by sellers, other than rebates or discounts, which include items in cash or in kind. Some of these include car, TV, computers, gold coins, cell phones, sponsored trips to family, free tickets, and free medical samples.
This deduction need not be made, if the value or total value of the distribution or benefit provided or likely to be provided to the resident during the financial year does not exceed Rs 20,000, the CBDT clarifies.
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