Tax Deducted at Source (TDS) on benefits received from business for sales promotion will be applicable to doctors. The Central Board of Direct Taxes (CBDT) has released guidelines on the applicability of the new provision. The Union Budget had brought in the provision of TDS on such income to check tax revenue leakage by inserting a new section, 194R, in the Income Tax Act, 1961. It requires TDS at 10 percent for any person providing benefits exceeding Rs 20,000 in a year to a resident.
CBDT clarifies that in case of doctors receiving free samples of medicines while employed in a hospital, Section 194R would apply on distribution of free samples to the hospital. The hospital as an employer may treat such samples as taxable perquisite for employees and deduct tax under Section 192. In such cases, the threshold of ₹ 20,000 has to be seen with respect to the hospital.
For doctors working as consultants with a hospital and receiving free samples, TDS would ideally apply on hospital first, which in turn would require to deduct of tax under Section 194R with regard to consultant doctors.
Section 194R will not apply if the benefit or perquisite is provided to a government entity, like a government hospital, not carrying on business or profession, said CBDT.