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In the 2022 budget tax proposals there is an insertion of section 194R seeking a tax withholding (TDS) on provision of any benefit or perquisite by a company to a resident.

Now the draft new provision is silent on the nature or definition of such benefits or perquisite or their valuation rule unlike rule 3 having aegis to forms of benefit and perquisites provides to salaried personnel.

In the absence of definition or corresponding valuation rule this new section will be a non starter and may fall.

In the meantime therefore companies have to revisit all contracts and agreements with residents such as consultants, retainers etc to ascertain benefits provided to them under such agreements in cash or in kind whether by reimbursements or otherwise for yet another discharge of compliance obligation and tax withholding.

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