Articles 1st Jul 2022

Taxing gifts — circular adding to confusion

Authors

Arihant Tater Associate Partner |
Kumar Visalaksh Partner | New Delhi | Noida

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From July 1, a new TDS provision (Section 194R) is being introduced in the Income Tax Act with a view to taxing benefits and perquisites provided by one person to another. In terms of the Budget Speech of the Finance Minister, the provision ostensibly seeks to cover business promotion strategies, whereby there is a tendency of businesses to pass on benefits/gifts to their agents/distributors, etc.

Against this backdrop, Kumar Visalaksh, Partner and Arihant Tater, Principal Associate at Economic Laws Practice (ELP) have co-authored an article tilted ‘Taxing gifts — circular adding to confusion’ which is published by BusinessLine. In their article Kumar and Arihant discuss the interpretational and practical challenges of the new TDS provisions. They are of the opinion that by clarifying that tax must be deducted at source even when the benefit is paid in cash, the CBDT circular gives room for litigation. The authors conclude by saying that the new circular cannot override the Act, but in its current form, it may set the ball rolling for another round of unwarranted tax litigation.

Read the detailed article here: Click here