Banks approach CBDT for clarity on new TDS norm

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Banks have approached the Central Board of Direct Taxes (CBDT) for clarity on the scope of Section 194R of the Income Tax Act, as they fear the newly introduced provision will force them to deduct a 10% tax at source on incentives extended to large business customers through credit cards, banking sources told FE.

According to Section 194R, introduced in the Budget for FY23, any person providing a resident a benefit or perquisite arising from a business or the exercise of a profession by such resident, will ensure that tax has been deducted at the rate of 10% of the value of the benefit or perquisite. The rules, tied to some riders, came into force on July 1.

In a meeting with the CBDT last month, representatives of banks and non-banking financial companies sought to know whether the TDS provision would apply to incentives relating to credit cards. They also flagged challenges in determining the nature of each transaction, business or personal, made through a credit card for TDS purposes.

Banks have also raised the issue of TDS on loans waived through one-time settlements or other schemes, and a relief on the front is expected soon.

“The CBDT has been proactive in its consultations. Banks have informed it of the challenges they will face in implementing the new TDS provision,” a senior banker said. However, the direct tax authority has declined to defer the applicability of the new section on the ground that any such step would require parliamentary approval, he said.

According to the new Section (194R), no TDS will be deducted if the aggregate value of perquisite/ benefit to a resident doesn’t cross Rs 20,000 in a fiscal year. Moreover, the provision won’t apply to a business whose total annual turnover doesn’t exceed Rs 1 crore; the limit is Rs 50 lakh in case of a professional.

Source from: https://www.financialexpress.com/money/income-tax/banks-approach-cbdt-for-clarity-on-new-tds-norm/2622530/

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