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New TDS Rules to affect Doctors and Social Media Influencers

The new Tax Deducted at Source i.e. TDS section 194R introduced in the Budget, 2022 will be applicable from 1st July 2022, requiring a deduction of 10% by any person (resident or non-resident) who provides benefit or perquisite to a resident person in a year exceeding INR 20,000 will be liable for TDS under section 194R.

What does Benefit & Perquisite mean?

  • Any benefit given by a person to a Resident in the form of freebie to ratify the brand. (Such as mobile phones, TV, gold coins etc.)
  • The benefit may be full in kind.
  • The benefit may be partly in kind and partly in cash.
  • This includes a free sponsorship, free air ticket, Free ticket for IPL too.
  • Free sample of medicine given to Medical practitioners.

These are the some examples and not an exhaustive list of benefits & perquisites.

Valuation of Benefit or Perquisite under 194R.

  • TDS will be deducted on Fair Market Value or
  • If the deductor has purchased the benefit/perquisite before providing it to the recipient then the value will be the Purchase price (Actual cost).
  • If the deductor manufactures any item then the price which are going to be charges to their customers for such item will be the value for such benefit/perquisite.

Is GST considered in the valuation?

No, GST is not considered in the valuation for TDS under section 194R.

How is the tax deducted on the perquisite?

  • Any benefit received in kind, then the deductor need to ensure that an advance tax is paid by the recipient of the benefit. Or
  • Person who provides the benefits will deduct TDS under section 194R for the value of the benefit.

Application of TDS on Working Doctors

CBDT i.e. Central Board of Direct Taxes clarifies that if doctors receive free samples of medicines while employed, Section 194R will apply to the distribution of free samples to the hospital.

As an employer, the hospital could consider these kind of samples as taxable perquisite for employed doctors and deduct tax accordingly.

In such cases, the threshold of INR 20,000 has to be seen with respect to the hospital. For doctors working as consultants and receiving free samples, ideally TDS would apply to the hospital first, which would need deducting tax under Section 194R regarding consultant doctors.

Application of TDS for Social Media Influencers.

A product or any freebie is given to the social media influencer to promote or endorse the brand on social media will be considered as a benefit or perquisite if the product is not returned.

When is 194R not applicable?

  • Section 194R will not be applicable if the benefit or perquisite is provided to a govt. entity, like a hospital who is not carrying on business or profession.
  • Cash discounts, Sales discounts and rebates allowed to customers.
  • When a social media influencer need to return the product after promotion or endorsement in social media.