Social media influencers and doctors in India will now be subjected to Tax Deducted at Source (TDS) from July 1, for benefits received from businesses for sales promotions. The Central Board of Direct Taxes (CBDT) has issued recommendations on the new provision’s applicability. The Union Budget made provision for TDS on incomes in order to prevent tax revenue leakage by incorporating a new section, 194R into the income Tax Act, 1961. Any individual who gives a resident a benefit of more than 20,000 in a year must pay TDS of 10 per cent, NDTV reported.
The Joint Secretary in the Finance Ministry, Kamlesh C Varshney explained advantages which includes free medicine samples for doctors, overseas flight tickets and free tickets of Indian Premier League (IPL) of business and many more things. He stressed that these items should be revealed while submitting an income tax return and shall not be hidden as they are not being sold.
The section 194R applies to sellers that offer incentives in cash or any kind such as car, computer, gold coins, mobile phones in addition to discounts.
This gave a break for the customers by exempting sales discounts or cash discounts from the section, claiming if it gets included will put the seller in difficulty. However, if perks such as mobile was returned to the manufacturer after being used for the purpose of service like for a social media influencer, then this new rule doesn’t apply in such cases.
The CBDT specifies that if doctors receive free samples of drugs while working in a hospital, section 194R applies free distribution of samples to the hospital. In case for doctors who work as consultants for a hospital and receive free samples, TDS should be applied first to the hospital which will deduct necessary tax under the section for doctors.
According to CBDT the section doesn’t apply the benefits to if supplied to a government institution that is not engaged in business or profession such as a government hospital.
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(With inputs from agencies)