Notifications CBDT
CBDT Circular on s.194R TDS on Benefits and Perquisites — ₹20,000 Threshold and Gross-Up
CBDT Circular No. 12/2022
- Issued
- 2022-06-16
- Effective from
- 2022-07-01
- Act
- Income Tax Act 1961 s.194R
What it says
Section 194R — basic obligation
Payer must deduct TDS at 10% on the value of any benefit or perquisite (whether convertible into money or not) provided to a resident, in connection with business or profession, exceeding ₹20,000 in aggregate per recipient per financial year.
₹20,000 aggregate threshold
TDS applies only when total benefits/perquisites to one recipient exceed ₹20,000 in the FY. Count from 1 April. Once the threshold is crossed, TDS applies from the next benefit payment onwards (cumulative tracking required).
Gross-up when TDS cannot be deducted from benefit
If the benefit is a physical item (gift hamper, car, etc.) and no cash payment exists to deduct TDS from, the payer must gross-up and pay TDS out of its own pocket. Circular provides the gross-up formula: TDS = (10/90) × benefit value.
What qualifies as a 'benefit or perquisite'
Free/subsidised goods or services, gift vouchers, use of car, holiday packages, free samples (other than for legitimate business promotion), cricket/club memberships provided as inducement for business.
Exclusion: genuine business samples
Free samples given in the ordinary course of business for product demonstration or promotion (not as a relationship reward) — excluded from s.194R. Circular para 8 provides guidance on the distinction.
Affected forms and returns
- Form 26Q (quarterly TDS return)
- Form 16A
- GSTR-3B (if benefit is taxable supply)
Whether s.194R applies to conference/seminar expenses paid for dealers or channel partners — the circular addresses this; free trips/conferences for business promotion are likely covered. Verify the specific fact pattern with a CA before treating as exempt.
Primary source
CBDT Circular No. 12/2022 — issued by CBDT under Income Tax Act 1961 s.194R
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