MONEY9: Recently the Central Board of Direct Taxes (CBDT), the apex body of the Income Tax Department, has announced the new rules for TDS on profits received by business or profession. These new rules regarding TDS came into effect from July 1, 2022 and social media influencers have also been included in the ambit of TDS. The new rule says that if a person gives a benefit of Rs 20 thousand or more to an Indian in a financial year, he has to deduct TDS at the rate of 10 percent. So let us now also understand when and where TDS will be deducted.
What does the new clause say?
The CBDT deems that the benefit may be in cash or in kind or both. A new section 194R has been added to the Income Tax Act and was announced by Finance Minister Nirmala Sitharaman in the Budget 2022. This section will apply when a person gives cash or any thing or sponsor trip, foreign air ticket or free ticket to IPL to another person, it will be treated as income from business or profession for the person receiving such benefit.
According to the new rule, TDS will also be levied on free medical samples given to doctors and gifts given to social media influencers. This rule will be applicable for the benefit which is given to increase the sales. Such benefits include cash or things like cars, TVs, computers, gold coins, mobile phones or free tickets to foreign tours or events.
When will the TDS rule not apply?
In case of social media influencer, if a company provides a gadget as part of its marketing strategy, it is mandatory to deduct TDS on it. However, the CBDT has made it clear that if the gadget or device is returned to the company after some time, the TDS rule will not apply.
As for doctors, if a doctor is employed in a hospital or working as a consultant and if a company gives him a free sample of medicine, then the rule of TDS will also apply there. As the doctor himself is an employee of the hospital, in such a case this TDS will be deducted at the hospital level. In which case TDS is not deducted?
The tax department has given some relief by exempting sales discounts, cash discounts and discounts to customers from the new TDS rule. However, under a provision, if any other type of discount is given apart from this type of discount, the new rule of TDS will apply.
ITR Filing Rules
According to the new Income Tax rules implemented in April-2022, it is mandatory for a person whose TDS or TCS is Rs 25,000 or more in a financial year to file a tax return. In case of a senior citizen, the total TDS or TCS figure must be Rs 50,000 or more to file ITR. The central government has increased the scope of ITR filing to include maximum people in the tax ambit.
A tax expert’s opinion
Tax expert Pankaj MathpalIt says, “The new section 194R will not apply to taxpayers who are not engaged in any business or profession. B2C benefits will also not come under the purview of 194R. But, those who have not filed income tax return in the assessment year 2021-22 and their total TDS and TCS in the financial year 2020-21 exceeds Rs 50,000, then in such circumstances they will have to pay TDS at a higher rate in the current financial year 2022-23. The higher rate of TDS will be applicable only on transactions like professional fees, contract payments, not on payment of wages.”
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