New TDS Rules From July 2022
For those who are influential on social media, it is mandatory to pay the TDS amount if the person keeps the equipment provided to them as part of a company marketing efforts. However, the CBDT clarified that the deductible tax at source would not apply if the equipment was returned to the company.
From July, a 10 per cent tax deductible at source (TDS) on business freebies for sales promotion will apply to social media influencers and doctors. The new TDS Act will come into effect from July 1 and the Central Board of Direct Taxes (CBDT) has issued a set of guidelines in this regard.
This provision was introduced in the Finance Act of 2022 to broaden the tax base so that those who benefit from such sales promotion expenses incurred by businesses can report it on their tax returns and pay taxes. For those who are influential on social media, it is mandatory to pay the TDS amount if the person keeps the equipment provided to them as part of a company marketing efforts. However, the CBDT clarified that TDS does not apply if the equipment is returned to the company.
“Whether this (a product provided for social media promotion activity on social media) is a benefit or a perquisit depends on the facts of the case. As it is a product of car, mobile, clothing, cosmetics, etc., if the product is returned to the manufacturing company after being used for the purpose of service, it will not be considered as a benefit or permissibility. Objectives of Section 194R of the Law (TDS Regulation), “the CBDT commented.
On the other hand, if it is kept by the individual, it will be in the nature of benefit or perquisit and will be tax deductible under Section 194R of the Act.
Furthermore, the CBDT has made it clear that no tax deduction is required under Section 194R of the Income Tax Act on sales discounts, cash discounts and rebates granted to customers. The situation will be a bit distorted if free samples are provided as the exemption does not apply.
TDS applicable cases include cash or car, television, computers, gold coin, mobile phone, overseas travel and free tickets to events promoting sales.
In the case of doctors who are employees or consultants in a hospital, if a free drug sample is taken from a company, it will be subject to TDS. TDS will be deducted from the hands of the hospital on account of the doctor being an employee of the hospital.
The CBDT explained, “In such a case, it will pay the tax first into the hands of the hospital and then allow the deduction as salary expenses. Thus, ultimately the tax on the amount is in the hands of the employee, not the hospital. The hospital will receive a tax deduction under section 194R of the Act on tax return. ”
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