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Tax Updates: June 2022

15 Jul 2022

Trilegal X AVCJ and MergerMarket – ION Group
This update covers key regulatory and judicial developments in the month of June 2022 relating to direct tax, customs and service tax and the recommendations of the GST Council.
Partner: Himanshu Sinha, Counsels: Aditi Goyal and Shashank Shekhar, Senior Associate: Tushar Joshi, Associates: Samyak Jain and Vibhu Gupta

Direct Tax

Guidelines on tax withholding on benefits/perquisites arising from business or profession

Under the newly introduced section 194R of the Income Tax Act, 1961 (IT Act), any person responsible for providing to a resident, any benefit or perquisite arising from a business or the exercise of a profession by such resident, must ensure that tax has been deducted at the rate of 10% of the value of such benefit or perquisite. The benefit or perquisite may or may not be convertible to money. This provision was introduced through the Finance Act, 2022 (FA 2022) and came into effect on 1 July 2022.

On 16 June 2022, the Central Board of Direct Taxes (CBDT) notified guidelines to clarify certain ambiguities surrounding this provision. We have analysed some of the important clarifications below.

    • Taxability for the recipient need not be tested: The person providing the benefit or perquisite is not required to check if such benefit is taxable in the hands of the recipient and is only required to ensure that tax has been deducted.
    • Provision also applies to cash benefits: In addition to benefits provided in kind, the provision would also apply to benefits paid in cash.
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