Section 194R inserted by Finance Act, 2022 and which became effective from 1st July, 2022 casts an obligation on the person responsible for providing any benefit or perquisite exceeding Rs 20,000 in a year to a resident, arising from the business or profession of such resident, to deduct tax at source @10%. There is no further requirement to check whether the amount is taxable in the hands of the recipient or under which section it is taxable.
CBIC vide Circular No. 12 of 2022-Income Tax dated 16th, June, 2022 had mandated that there is no requirement to check whether the perquisite or benefit is taxable in the hands of the recipient and the section under which it is taxable. One case law was also stated in said Circular as under:
The amount representing principal loan waived by bank under one time settlement scheme would constitute income falling under section 28(iv) relating to value of any benefit or perquisite, arising from business or exercise of profession. CIT v Rainaniyam Homes (P) Ltd (2016) 68 taxmann.com 289 (Mad).
The above lead to uproar in the banking and financial sector and matter was represented to MoF by banks and Financial Institutions.
It has now been reported that the CBDT will soon come out with a circular for various stakeholders, especially banks, to “clarify” the procedures on the applicability of new TDS provisions regarding benefits or prerequisites received in a business or profession.
CBDT Chairman Nitin Gupta said the board, which frames policies for the Income-Tax department, will issue an official explainer on the subject, including the “pressing” issue of one-time settlement (OTS) being faced by the banks.
“We will clarify the position that will be helpful to the stakeholders. We will be coming out with a clarificatory circular very soon,” he said during an interaction on Thursday.
Gupta said all issues on the canvass of section 194R of the Income Tax Act will be addressed as part of the forthcoming circular.
While the CBDT had issued a set of guidelines in June with regard to the applicability of the newly introduced section 194R in the Income Tax Act, the banking sector had specific concerns with regard to their businesses and operations.
Bank representatives had recently made a representation to the CBDT, seeking a clarification on the contours and the scope of section 194R as they apprehend that the recently introduced provision in the Budget will force them to deduct a 10 per cent tax at source on incentives extended to business customers through credit cards and on loans waived through one-time settlement or similar schemes.
The Budget 2022-23 brought in a new section, 194R, in the I-T Act which requires tax deducted at source (TDS) at the rate of 10 per cent by any person, providing any benefit or perquisite
Source: zeebiz.com
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