Budget Buzz - TDS U/s 194R On Advantage Or Perquisites Allowed

Budget Proposal

Section 28(iv) of the Income-tax Act (IT Act) taxes the non-monetary benefit or perquisite arising from business or profession whereas Section 194R of the IT Act provides for 10% withholding tax on providing business perquisites.

The Finance Bill 2023 proposes to amend the Section 28(iv) of the IT Act to include cash/ monetary perquisites as well within its ambit. Similarly, it is proposed to clarify that withholding tax under Section 194R of the IT Act is applicable whether the perquisite received is in cash or in kind or partly in cash and kind.

Background to the Issue

It is a settled position under Section 28(iv) by judicial pronouncements, including the decision of Hon'ble Supreme Court in the case of CIT v. Mahindra & Mahindra Ltd. [2018] 93 taxmann.com 32 (SC), that the said section only taxes the non-monetary business perquisites and excludes any cash / monetary perquisites from its ambit.