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The 2-Minute Summary
Section 393(1) Sl. No. 8(iv) requires any specified person who provides a benefit or perquisite (cash or kind) to a resident, where the benefit arises from the recipient’s business or profession, to deduct TDS at 10% on the value of that benefit. TDS applies once the aggregate value of benefits to a single recipient in the Tax Year exceeds Rs. 20,000.
Note 2 to Sl. 8(iv) states: this provision applies to any benefit or perquisite, whether in cash or in kind or partly in cash and partly in kind. Before providing such benefit, the person responsible shall ensure that tax has been deducted.
Example: A pharma company gives a doctor medical equipment worth Rs. 50,000. TDS = 10% = Rs. 5,000. Since the benefit is in kind, the company must ensure this tax is paid before delivering the equipment (Note 2).
Example: A company gives a dealer a trip to Goa worth Rs. 1.5 lakh. TDS = 10% = Rs. 15,000. The company either recovers this from the dealer or pays it from its own funds before the trip.
Under Income Tax Act 1961: Section 194R of the Income Tax Act 1961. Now Section 393(1) Sl. No. 8(iv) of the Income Tax Act 2025.
At a Glance
| Item | Details |
| New Act Reference | Section 393(1), Sl. No. 8(iv) of Income Tax Act 2025 |
| Old Act Reference | Section 194R of Income Tax Act 1961 |
| Who Deducts | Specified person providing the benefit |
| Rate | 10% of value or aggregate value of benefit or perquisite |
| Threshold | Rs. 20,000 aggregate per recipient per Tax Year |
| Nature of benefit covered | Any benefit or perquisite, convertible to money or not, arising from the recipient’s business or profession |
| In-kind rule | Note 2: ensure TDS is paid before providing the benefit |
| VDA exchange rule | Note 6(a)(i): where benefit is given in exchange for a VDA with no cash, ensure TDS is paid before releasing |
| ‘Person responsible’ defined | Note 6(b): the person providing the benefit; in case of a company, the company including its principal officer |
| Form for TDS Certificate | Form 16A |
Note 2 to Section 393(1) Sl. No. 8(iv) states: the provisions of Sl. 8(iv) shall also apply to any benefit or perquisite, whether in cash or in kind or partly in cash and partly in kind, provided to a resident and before providing such benefit or perquisite, as the case may be, the person responsible for providing such benefit or perquisite shall ensure that tax has been deducted.
This removes any ambiguity: in-kind benefits are fully covered. The obligation to ensure TDS is paid before providing the benefit rests on the giver.
Note 6(a)(i) to Sl. 8(iv) and 8(vi): where the benefit is in exchange of another virtual digital asset where there is no part in cash in respect of Sl. 8(iv), the person responsible for providing shall ensure that the tax required to be deducted has been paid before providing such benefit.
Note 6(b): person responsible for providing means the person providing such benefit or perquisite, or in case of a company, the company itself including the principal officer thereof.
Threshold: Aggregate Per Recipient Per Year
The Rs. 20,000 threshold is the aggregate value of all benefits given to the same recipient in the Tax Year. Once the cumulative total crosses Rs. 20,000, TDS at 10% applies on the entire amount including the amount that took the total above the threshold.
Example: A company gives a dealer a mobile phone worth Rs. 12,000 in April and a gift hamper worth Rs. 10,000 in October. Total = Rs. 22,000, which exceeds Rs. 20,000. TDS of 10% on Rs. 22,000 = Rs. 2,200 must be ensured before providing the second benefit.
Practical Compliance Checklist
- Maintain a benefit register tracking the cumulative value of all benefits given to each recipient in the Tax Year. Once the total crosses Rs. 20,000, TDS must be deducted or ensured on all further benefits.
- For in-kind benefits: either recover the TDS amount from the recipient before providing the benefit, or pay TDS from company funds and treat it as an additional benefit (which may increase the taxable value).
- For pharmaceutical companies: all doctor gifts, equipment, sponsored trips, and conference sponsorships aggregated above Rs. 20,000 per doctor per year attract TDS.
- Issue Form 16A to every recipient on whom TDS was deducted or paid. Recipients claim this as TDS credit in their ITR.
Sl. 8(iv) addresses a longstanding gap where large corporate benefits to dealers, doctors, and professionals were taxable in the recipient’s hands but rarely reported. The provision places the TDS obligation firmly on the giver.
