Section 194R: Benefit or Perquisite in respect of Business/ Profession

author portrait

Swapnil Agarwal

TDS on Perquisites
TDS Sections
Last updated on February 7th, 2023

A new Section for TDS has been introduced in the Union Budget 2022. TDS under Section 194R relates to the deduction of tax on benefits or perquisites in respect of business and profession. This section has been mainly inserted to avoid misreporting of income that people are receiving in the form of any perks or other benefits in non-monetary form from the business or profession.

Applicability of Section 194R

If any resident individual receives any gift, perks, incentive, or any other monetary or non-monetary benefit from a business or profession in cash, kind, or partially in cash and kind, and the value of such benefits or perquisites in monetary term exceeds INR 20,000 during the financial year to one beneficiary then this section is applicable to you.

Who shall deduct TDS u/s 194R?

If any business or profession is giving benefits or perquisites to any agent, channel partner, dealer, distributor, or any other person of an amount more than the specified amount during the financial year to one recipient then they are liable to deduct TDS under Section 194R.

However, it is not applicable to the Individual/HUF to deduct TDS if the total sales don’t exceed INR 1 crore in the case of business and INR 50 Lakh in the case of a profession in the immediately preceding financial year.

Purpose of Section 194R

The main purpose of introducing this section is to avoid tax evasion. Previously the businesses while giving the perks, benefits, and other non-monetary benefits to their dealers, partners, and other persons claimed it as a business expense while the person who is receiving such benefit was not showing this as their income.

For example- A cement manufacturing company gives non-monetary benefits like Motorcycle, electronic items, and leisure trips to their dealers if they achieve the specified targets.

In the above example, the company which has given benefits to its dealers was showing it as a business expense while the person who has received such benefit was not showing this as his income while filling the income tax return since it is in kind. So to avoid this misreporting of income the Income tax department has introduced this section 194R.

TDS Rate Applicable on Section 194R

Non-applicability of TDS u/s 194R

How to Deduct TDS from benefits or perquisites?

It is the responsibility of the person who is providing such benefits or perquisites to ensure that tax is required to be deducted and paid in respect of such items before releasing such benefits or perquisites.

The liability can be discharged by any of the below options:

If the payee is depositing the TDS amount on their own then they can submit the challan to the deductor so that they can consider the Advance tax challan while filling their TDS return
If the payee is depositing the TDS amount on their own then they can submit the challan to the deductor so that they can consider the Advance tax challan while filling their TDS return

TDS Certificate

The Deductor of the tax shall issue a quarterly TDS certificate to the deductee in form 16A. The deductor can download form 16A from the Traces Account and also the deductee can see the same in their 26AS.

TDS Return

The deductor liable to deduct tax under Section 194R of the Income tax act shall file quarterly returns in form 26Q.

Find the best plan
Find the best plan
Find the best plan
Find the best plan


Whether the benefits or perquisites provided before 01-07-2022 shall also be considered in the threshold limit of INR 20,000?

Yes, Section 194R is applicable from 01-07-2022. Still, for calculating the limit of INR 20,000 the benefits received from 01-04-2022 to 30-06-2022 should also be considered in calculating the threshold limit of INR 20,000.

How is the price of benefits or perquisites to be calculated?

The price of benefits or perquisites is to be calculated on the basis of the fair market value of such products.

Whether sales discounts, cash discounts, and rebates are benefits or perquisites?

No, these discounts and rebates are being reduced from the sale price so these are not being treated as benefits or perquisites.

  • A Ramakrishnan shankar says:

    u/s 194 R the individual should pay tax as per the individual tax slab or it is only 10% flat rate

  • Shanti Sunder says:

    How will a reimbursement to employee who bought the gift using his corporate card and then sent the gift to client be treated u/s 194R. Reason I ask is while reimbursing, the company is debiting it’s P&L so it is company cost…could that be the rationale for T&E to also come under this section

  • Chavinesh Mukund says:

    Hello Sir,

    I recieved two prizes in a contest , on which 90% of the amount was gifted as goods and 10% was deducted as TDS under section 149R. Now, I want to file ITR but I don’t know which ITR form should I file ? Kindly guide me.

  • Naveen kumar says:

    194R mein received benifit mein ham itr mein kis coulm mein dikhayen aur Keya ye hamaare liye income hai

  • Umesh Gupta says:

    Commission paid to employees on sales.
    This is in addition to his salary on achieving targets.
    We have Deducted TDS under Section 194 H.
    Whether it should be deducted under Section 194R ??

  • Dinesh chandak says:

    If dealer who received some amounts and foreign tour on which TDS deducted u/s194 R and showing net profit under section 44 AD . Then this amount received to be shown as income from other sources? Because it won’t shown in GST returns.

Leave a Reply

Your email address will not be published. Required fields are marked *