Section 194R - TDS on Benefits or Perquisites in Business/Profession
# Section 194R: TDS on Benefits or Perquisites
## What it Covers
Where any person provides any benefit or perquisite (whether convertible into money or not) to a resident, arising from business or the exercise of a profession, TDS must be deducted.
## Threshold
Value or aggregate value of benefit or perquisite exceeds ₹20,000 in a F.Y. to a single recipient.
## Who Must Deduct?
Any person providing such benefit/perquisite except:
An individual or HUF whose total sales, gross receipts or turnover:
≤ ₹1 crore (business), OR
≤ ₹50 lakhs (profession)
during the immediately preceding F.Y.
> In case of a company, 'person responsible for paying' = the company itself, including its Principal Officer.
## Rate & Timing
Rate: 10% of value/aggregate value of benefit or perquisite.
Timing:Before providing such benefit or perquisite.
## Crucial Feature: Cash or Kind
The provision applies to benefits given:
In cash
In kind
Partly in cash, partly in kind
When the benefit is wholly in kind, the provider must ensure tax has been paid (e.g., by collecting cash from the recipient) before releasing the benefit.
Worked example
### Example 1
Example: XYZ Pharma Ltd. (turnover ₹50 crores) gifts a foreign trip worth ₹1,50,000 to a doctor (resident, business income > ₹50L p.a.) for prescribing its medicines during FY 2025-26.
Provider is a company (not exempt small entity) ✓
Value > ₹20,000 ✓
TDS u/s 194R = 10% × 1,50,000 = ₹15,000
Tax must be ensured/paid before providing the benefit.
### Example 2
Example: Mr. P, an individual professional with gross receipts ₹40 lakhs in PY 2024-25, gives a Diwali gift hamper worth ₹25,000 to his major client.
Provider is individual with profession receipts ≤ ₹50 lakhs → exempt.
No TDS u/s 194R required.
⚠️ Common exam mistakes
Believing TDS applies only when the benefit is in cash — it equally applies to benefits in kind.
Applying ₹1 crore exemption threshold for individual professionals — for profession it is ₹50 lakhs.
Deducting TDS at the time of providing the benefit instead of BEFORE providing it.
Excluding non-monetary perquisites (free trips, gold coins, etc.) from the scope.
Bare-Act text Section 194R · Income-tax Act, 1961 · click to expand
Section 194R: Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite.