Mumbai, June 21: According to a new provision in Income Tax Act, 1961, a Tax Deducted at Source (TDS) will be applied to doctors and social media influencers on the freebies they receive from businesses for sales promotional purposes. The new provision, Section 194R, will be applicable from July 1, 2022. The Central Board of Direct Taxes (CBDT) released guidelines on the new provision.

The provision was introduced in the Finance Act of 2022 to widen the tax base and to keep tax revenue leakage in check. “Whether this (the product given for sales promotion activity in social media) is beneficial or perquisite will depend upon the facts of the case. In case of benefit or perquisite being a product like a car, mobile, outfit, cosmetics, etc and if the product is returned to the manufacturing company after using for the purpose of rendering service, then it will not be treated as a benefit or perquisite for the purposes of section 194R of the Act (the TDS provision)," CBDT said. Net Direct Tax Collections Rises 45% to Over Rs 3.39 Lakh Crore Till Mid-June 2022.

The TDS rule also covers free medicine samples given by the business to a doctor who works for a hospital or is a consultant. CBDT clarified that “ the free sample would be the first taxable in the hands of the hospital and then allowed as deduction as salary expenditure. Thus, ultimately the amount would get taxed in the hands of the employee and not in the hands of the hospital. Hospitals can get credit for tax deducted under Section 194R of the Act by furnishing its tax return."

The new guidelines state that government will levy a 10% TDS on free gifts when the product is retained. However, if the product is returned to its manufacturer after the promotional purpose, there will not be a deduction.

(The above story first appeared on LatestLY on Jun 21, 2022 02:48 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).