Guidelines for removal of difficulties under sub section 2 of section 194R of the income tax act 1961
Circular No. 12/2022 was issued by the Central Board of Direct Taxes on 16 June 2022. Its subject is Guidelines for removal of difficulties under sub section 2 of section 194R of the income tax act 1961.
These are guidelines issued under a power in the section itself. Where a section says the Board may issue guidelines and that they bind, the guidelines carry more weight than an ordinary circular — read the enabling words before deciding which kind this is.
The first set of guidelines under section 194R(2), issued with the prior approval of the Central Government. The section, inserted by the Finance Act, 2022 with effect from 1 July 2022, requires a person providing any benefit or perquisite to a resident to deduct tax at 10 per cent of its value or aggregate value before providing it, whether or not the benefit is convertible into money, so long as it arises from the resident's business or profession. No deduction is required where the value or aggregate value provided or likely to be provided to that resident in the financial year does not exceed Rs. 20,000, and an individual or Hindu undivided family deductor is outside the section where turnover or gross receipts from business did not exceed Rs. 1 crore, or from profession Rs. 50 lakh, in the immediately preceding financial year. Guidelines under sub-section (2) are laid before each House of Parliament and bind the income-tax authorities and the person providing the benefit. On the first question, the Board says the deductor need not test whether the benefit would be taxable in the recipient's hands under clause (iv) of section 28 — it might be taxable under some other provision such as section 41(1) — because section 194R casts the obligation to deduct without any further inquiry into the recipient's charge.
Section 194R(2) empowers the Board to issue guidelines to remove difficulties in giving effect to the new section, and it did so a fortnight before the section came into force.
F. No. 370 I 42/27/2022-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
***********
Circular No. 12 of 2022
New Delhi, dated 16th June, 2022
Subject: Guidelines for removal of difficulties under sub-section (2) of section 194R of the Incometax Act, 1961Finance Act 2022 insetted a new section 194R in the Income-tax Act, 1961 (hereinafter referred to as "the
Act") with effect from I" July 2022.The new section mandates a person, who is responsib le for providing any benefit or perquisite to a
resident, to deduct tax at source @ IO% of the value or aggregate of va lue of such benefit or perquisite,
before provid ing such benefit or perquisite. The benetit or perquisite may or may not be convertible into
money but should arise either from carrying out of busi ness, or from exercising a profession, by such
resident.This ded uction is not required to be made, if the va lue or aggregate of va lue of the benefit or perquisite
provided or like ly to be provided to the resident during the financial year does not exceed twenty
thousand rupees.The responsibility of tax deduction also does not apply to a person, be ing an Individual/Hindu undivided
family (HUF) deductor, whose total sales / gross receipts / gross turnover from business does not exceed
one crore rupees, or from profession does not exceed fifty lakh rupees, during the financia l year
immediately precedi ng the financial year in which such benefit or perquisite is provided by him.Sub-section (2) of section 194R of the Act authorises the Board to issue gu idelines, for removal of
difficu lties, with the approva l of the Central Government. These guidelines are req uired to be laid before
each House of Parliament and are binding on the income-tax authorities and the person providing the
benefit or perquisite.Accordingly, in exerc ise of the power conferred by sub-section (2) of section 194R of the Act, the Board,
with the prior approval of the Central Government, hereby issues the foll owing guidelines:-Guidelines
Question 1. Is it necessary that the person providing benefit or perquisite needs to check if the
amount is taxable under clause (iv) of section 28 of the Act, before deducting tax under section
194R of the Act?Answer: No. The deductor is not required to check whether the amount of benefit or perquisite that he is
providing wou ld be taxable in the hands of the recipient under clause (iv) of section 28 of the Act. The
amount coul d be taxable under any other section like section 41(1) etc. Section 194R of the Act casts an
obligation on the person responsible for providing any benefit or perquisite to a resident, to deduct tax at
source @ 10%. There is no fUither req uirement to check whether the amount is taxable in the hands of the
rec ipient or under which section it is taxab le.
On a section 201 or section 271C proceeding for failure to deduct under section 194R on incentives, free samples or sponsored travel given from 1 July 2022.
It mentions. Circular No. 12/2022
Source: the Income Tax Department’s own published text — its page for this instrument.