By Nitesh Buddhadev
Finance Act 2022 inserted a brand new part 194R within the Income-tax Act, 1961 with impact from 1st July 2022. The new part mandates an individual offering any profit or perquisite to a different particular person for his or her enterprise/career, to deduct tax at supply @ 10% of the mixture of worth of such profit or perquisite. The profit or perquisite could also be in money or sort. In case, the mixture worth of profit is lower than Rs. 20,000, TDS will not be relevant underneath this part. The CBDT has issued round no. 12 of 2022 dated 16th June 2022 and clarified sure conditions on the applicability of this part.
Social media influencers are actually a days enjoying an essential position in any Company’s advertising technique. An fascinating query that arises on the introduction of this part is ought to TDS be deducted on the product given to a social media influencer for promotion of the product on social media.
For instance, Social media influencer Rohini receives a cell phone value Rs. 1,18,000 (cell phone 1 lakh plus GST 18,000) from Company X, Car value Rs. 15 lakh from Company Y and Cosmetics value Rs. 15,000 from Company Z. Rohini costs charges of Rs. 15,000 to Company X, Y, Z every. Now, Rohini promotes all these merchandise and retains the cell phone and cosmetics together with her. She returns the automotive to Company Y after the promotion.
Since Rohini has not returned the merchandise to Company X and Z, it might be thought-about as profit or perquisite supplied for the aim of enterprise/career. Company X shall deduct TDS underneath Section 194R on the worth of the cell phone excluding GST. TDS legal responsibility could be Rs. 10,000 which shall be retained from the charges payable to Rohini. For Company Z, the worth of profit supplied doesn’t exceed Rs. 20,000 and therefore no TDS legal responsibility would come up to Company Z. For Company Y, the automotive is returned by Rohini therefore, there isn’t a profit which is supplied to Rohini over and above the charges charged by her and therefore no requirement to deduct TDS.
Suppose, Rohini does yet another product promotion for Company Z and thus once more receives merchandise value Rs. 10,000 from Company Z. Now, the mixture worth of advantages supplied by Company Z to Rohini is Rs. 25,000 and thus TDS of Rs. 2,500 should be deducted underneath Section 194R by Company Z from the charges payable to Rohini.
Now, Rohini receives a suggestion for a product promotion from Company A from one other metropolis. She charged charges of Rs. 50,000 to Company A. Rohini does the product promotion and returns the product to Company A and believes that no TDS shall be deducted. She incurred journey expenditure of Rs. 35,000 which is reimbursed by Company A.
Normally, the charge acquired by the influencer is their revenue and the expenditure incurred on journey is their expenditure deductible from such revenue in computing their whole revenue. Now if this journey expenditure is met by the Company A, it’s profit or perquisite supplied by Company A to the influencer and therefore TDS is to be deducted underneath Section 194R. Hence, TDS of Rs. 3,500 shall be deducted from the charges payable to Rohini.
However, if the unique bill for the journey expense is obtained in Company A’s title then the service recipient could be thought-about as Company A and Rohini would solely pay the expense on behalf of the Company and later get it reimbursed by the Company. This transaction the place the bill is within the title of Company A wouldn’t be thought-about as profit or perquisite for Rohini and no TDS legal responsibility would come up for Company A underneath Section 194R.
(The creator is a Chartered Accountant and founding father of Nimit Consultancy)
Source: www.financialexpress.com”