Section 194R TDS on Benefits & Perquisites (Business)

If you’re a business owner, professional, or accountant in India, you can’t afford to ignore TDS Section 194R. Introduced to bring more transparency and accountability in taxation, this provision impacts anyone offering benefits or perquisites in the course of business or profession.

Let’s break down the essentials of Section 194R TDS – from applicability to accounting entries, and how CharteredHelp can make compliance effortless for you.

✅ What is TDS Section 194R?

Section 194R was introduced in the Finance Act, 2022, and came into effect on 1st July 2022. This section mandates deduction of TDS by any person providing benefits or perquisites to a resident, arising from business or professional activities.

These benefits could be in cash, kind, or both, and need to be taxed at source before being extended to the recipient.

📌 194R TDS Rate

The TDS rate under Section 194R is a flat 10% on the value of the benefit or perquisite provided.

⚠️ Note: There’s no need to check whether the benefit is taxable in the hands of the recipient. TDS must be deducted regardless.

📈 194R TDS Limit

TDS under Section 194R applies only if the total value of benefits or perquisites provided to a resident during a financial year exceeds ₹20,000.

✅ Anything below ₹20,000? No TDS is required.

Rs. 20,000/- threshold limit is to be checked in aggregate regarding a person in a year.

📍 TDS Section 194R Applicability

Who should deduct TDS?

Any business or professional (individuals, firms, companies) providing benefits or perquisites to residents.

Who is exempt?

Individuals/HUFs whose turnover in the previous financial year is less than ₹1 crore (business) or ₹50 lakh (profession) are not required to deduct TDS under this section.

👥 Is 194R Applicable to Employees?

No, benefits or perquisites provided to employees are covered under Section 192 (salary TDS), not under 194R.

🎯 Section 194R specifically applies to non-employees such as agents, consultants, dealers, or business partners.

💡 194R TDS Example

Let’s say a company gives a foreign trip worth ₹1,00,000 to one of its distributors for achieving sales targets.

This trip is a perquisite, and under 194R, the company must deduct ₹10,000 as TDS (10% of ₹1,00,000) before providing this benefit.

If the trip is fully sponsored, the company must bear the TDS cost, unless the distributor agrees to pay it.

🧾 194R Accounting Entries

Accounting treatment for 194R involves:

Debit: Benefit/Perquisite Expense A/c
Credit: TDS Payable (194R) A/c
Credit: Bank/Cash/Other Payable A/c (Net of TDS)

🧾 194R TDS Head of Income

The head of income for 194R is “Profits and Gains of Business or Profession”.

The recipient must report the benefit under this head while filing their income tax return.

🤝 194R TDS GST Applicability

GST and TDS under Section 194R are two separate compliances.

If the benefit is a taxable supply under GST, GST must be charged separately.
TDS under 194R is calculated on the value including GST unless clarified otherwise by CBDT.