A new section requires TDS to receive any benefits over Rs 20,000 in a year. (representative photo)

Changes to the related to tax deduction at source (TDS) take effect . The Central Board of Direct Taxes (CBDT) issued guidelines on the changes last month. Foremost among them is the TDS levy on free samples received by and doctors.

The federal budget provides TDS for such income to for tax runoff by inserting a new section 194R into the Income Tax Act 1961.

It requires a TDS of 10% for anyone providing benefits to over Rs 20,000 per annum.

What are the benefits and benefits?

Explaining the benefits, Kamlesh C Varshney, joint secretary of the Ministry of Finance, said that these benefits include free medicine samples received by doctors, foreign air tickets or free Indian Premier League (IPL) tickets in the course of business, among others.

Mr Varshney stressed that this information should be disclosed when filing income tax returns, adding that this should not have been avoided based on the fact that the items were not being sold.

Section 194R also applies to sellers who offer incentives other than or rebates in cash or in kind (such as cars, TVs, computers, coins, and cell phones).

What if a doctor works in a hospital?

In the June 16 notification, the CBDT clarified that if a doctor receives a free sample of a drug while in the hospital, Section 194R will apply to the distribution of the free sample to the hospital. A hospital as an employer may treat such a sample as a taxable benefit of the employee and deduct tax under Section 192. In this case, the threshold of Rs 20,000 for the hospital must be seen.

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For physicians serving as consultants in hospitals and receiving free samples, ideally, TDS would be applied to the hospital first, which in turn would require a tax deduction for the consultant physician under Section 194R.

What are the exemptions?

According to the CBDT notification, section 194R will not apply if benefits or allowances are provided to a entity (such as a government hospital) but are not engaged in business or profession. Maximum retail price (MRP) discounts and rebates offered by sellers are also excluded.

The inclusion of these rebates and discounts will put sellers in a bind, CBDT said.

In addition, benefits such as mobile phones are not covered by the new rules if they are returned to the manufacturing company after being used to provide services (in the case of social media influencers).