CBDT issues guidelines for new tax rule on gifts, benefits to influencers

The Central Board of Direct Taxes(CBDT) on Thursday issued detailed guidelines on the applicability of the new taxdeducted at source (TDS) provisions that come into effect on July 1.  

Under the provision, benefits like free medical samples received by doctors and gifts retained by social mediainfluencers will attract TDS under the new provisions related to benefits orperquisites received in a business or profession.  

During Budget 2022-23, the government announced provisions on TDS on benefits or perquisites to keep a check on tax revenue leakage. However, there were doubts around the provisionwhich had required the clarity.  

A section was introduced in theI-T Act which requires deduction of tax at source at the rate of 10 per cent byany person, providing any benefit or perquisite exceeding Rs 20,000 in a year toa resident, arising from the business or profession of such resident. 

According to the CBDT, if a socialmedia influencer retains a product from the manufacturing company after usingfor the purpose of rendering service, then it will be treated as abenefit/perquisite under newly-introduced Section 194R of the IT Act.  

However, if the product is notretained then said provision would not be applicable.  

For doctors, the tax body clarified that if they receive free samples of medicines while being employed at ahospital, the new tax provision would apply on distribution of free samples tothe hospital.  

If a free medicine sample is provided by a company to a doctor who is an employee of the hospital, the TDS willbe deducted by the company as the benefit/perquisite is provided to the doctoron account of him being the employee of the hospital. Thus, in substance, thebenefit/perquisite is provided to the hospital. 

Section 194 R is applicable onevents when a person gives incentives (other than discount, rebate) in the formof cash or kind, or a person sponsors a trip for the recipient and his/herrelatives upon achieving certain targets. 

The tax department provided abreather on sales discount, cash discount and rebates allowed to customers byexcluding them from the purview of the new section as their inclusion would putthe seller into difficulties.  

However, incentives other than salesdiscount, dash discount and rebates will be covered.  “Certain aspects, particularly applicabilityof withholding tax on reimbursement of OPE’s, benefits provided in cases ofrecipient not engaged in business or profession etc. could open up a host ofpractical issues which taxpayers should brace themselves with,” said SudinSabnis, partner, Nangia Andersen LLP.