Section 194R · TDS on benefits or perquisites in business or profession
Free trips, gifts, samples to your dealers? Withhold TDS first.
- Rate
- 10% (on FMV)
- Threshold
- ₹20,000 per recipient / FY
- Applies to
- Benefits arising from business / profession
- Small business exemption
- Turnover ≤ ₹1 cr business / ₹50L profession
In plain English
If your business gives any benefit or perquisite — gifts, foreign trips, gold coins, free products — to a person who has a business/professional relationship with you, you must deduct 10% TDS on its fair value, once benefits in a year cross ₹20,000.
| Meaning | Number |
|---|---|
| Rate | 10% (on FMV) |
| Threshold | ₹20,000 per recipient / FY |
| Small business exemption | Turnover ≤ ₹1 cr business / ₹50L profession |
Examples of benefits covered by 194R
- Gifts to dealers / distributors — Cars, gold coins, electronics
- Sponsored foreign / domestic trips — For doctors, dealers, agents
- Free samples beyond normal trade practice — Pharma, FMCG
- Sponsorship of events / conferences — Where individual benefit arises
- Waivers of loans / receivables — Treated as benefit (per CBDT circulars)
What this section covers
Section 194R (effective from 1 July 2022) requires every person providing a 'benefit or perquisite' to a resident, where such benefit arises from the carrying on of a business or profession, to deduct TDS at 10% of the value of the benefit. The threshold is ₹20,000 per recipient in a financial year. The provision applies whether the benefit is in cash or kind (free products, gifts, sponsored trips, gold coins, etc.). Where the benefit is wholly in kind, the deductor must first ensure that the equivalent tax has been paid before the benefit is released. Individuals and HUFs with turnover up to ₹1 crore (business) or ₹50 lakh (profession) in the preceding year are not required to deduct. CBDT Circulars No. 12/2022 and 18/2022 clarify scope, valuation and exclusions.
Read the legal text
“Any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent of the value or aggregate of value of such benefit or perquisite…”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 194R | 393 |
| Topic | TDS on benefits or perquisites in business or profession | |
| Verdict | Consolidated under unified TDS section | |
| Notes | Restated within Section 393 under the Income-tax Act, 2025. The 10% rate, ₹20,000 threshold and small-business carve-out are retained. | |
Common confusion
194R applies to benefits arising from BUSINESS or PROFESSION — not to gifts between friends or family. Sales discounts and rebates in the ordinary course are excluded per CBDT clarifications.
Who should know this
Related sections
Based on the official Income-tax Act, 1961 and the published Income-tax Act, 2025 as available on the Income Tax Department website. Always verify against the published Act and consult a qualified professional.
Detailed review pending
This page's mapping comes from the original 21 Aug 2025 dataset and has not yet been re-checked against the Finance Act 2026 consolidation.
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