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Social media influencers, doctors will pay TDS from today

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Any profit above Rs 20,000 in a year requires TDS in a new section. (representative photo)

Changes in the rules related to Tax Deduction at Source (TDS) have come into effect from today. The Central Board of Direct Taxes (CBDT) had informed about these changes by issuing guidelines last month. Most important among them is the recovery of TDS on free samples received by social media influencers and doctors.

The provision of TDS on such income was introduced in the Union Budget by inserting a new section, 194R, in the Income Tax Act, 1961 to check leakage of tax revenue.

TDS at 10 per cent is required for anyone providing a benefit of more than Rs 20,000 in a year to a resident.

What comes under benefits and perks?

Kamlesh C Varshney, Joint Secretary in the Finance Ministry, had explained the benefits, which he said include free drug samples received by doctors, foreign flight tickets or free Indian Premier League (IPL) tickets during the course of business and much more.

Mr Varshney had further emphasized that these should be disclosed while filing the Income Tax Return, adding that the same should not be avoided on the ground of non-sale of these items.

Section 194R shall also apply to sellers offering incentives other than rebates, which are in cash or kind, such as cars, TVs, computers, gold coins and mobile phones.

What if a doctor is working in a hospital?

The CBDT, in its June 16 circular, has clarified that section 194R will be applicable on distribution of free samples in the hospital if doctors receive free samples of medicines while on duty in the hospital. Hospital as an employer can treat such samples as taxable perquisite to the employees and deduct tax under section 192. In such cases, a limit of Rs 20,000 in respect of the hospital has to be observed.

For doctors working as consultants in a hospital and receiving free samples, TDS would ideally be applicable on the first hospital, which would require tax deduction under section 194R in respect of consultant doctors.

What are the discounts?

As per CBDT circular, section 194R shall not apply if profit or perquisite is granted to a Government hospital, such as a Government hospital, which is not in business or profession. Discounts and discounts offered by sellers on the Maximum Retail Price (MRP) have also been excluded.

The CBDT said that by including these exemptions and exemptions, the seller will face difficulties.

Further, if profits such as mobile phones are returned to the manufacturing company for the purpose of providing the service (in the case of social media influencers), it will not be covered by the new provision.

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