CHENNAI: As per new guidelines released by the Central Board of Direct Taxes (CBDT), doctors and social media influencers are now subjected to a new rule that demands 10% tax deduction at source (TDS) on the freebies that they receive for sales promotions from various businesses.
CBDT has released the guidelines along with a new provision for TDS which will be applicable from 1 July 2022.
This provision was introduced in the 2022 Financial Budget where the businesses that benefit from the expenditure also record it in their tax returns and also pay tax for the profit that comes from it.
The CBDT has clarified that the TDS is applicable to social media influencers only if the products sent for marketing by businesses are retained by them. If they have to return the product back to the business after marketing it, the rules of TDS do not apply.
“Whether this (the product given for sales promotion activity in social media) is beneficial or perquisite will depend upon the facts of the case. In case of benefit or perquisite being a product like car, mobile, outfit, cosmetics etc and if the product is returned to the manufacturing company after using for the purpose of rendering service, then it will not be treated as a benefit or perquisite for the purposes of section 194R of the Act (the TDS provision)," CBDT said.
The TDS rule also covers free medicine samples given by business to a doctor who works for a hospital or is a consultant. Because the doctor is an employee of the hospital, the TDS must be deducted from the hospital. The hospital may then regard this as a benefit provided to the doctor, deducting income tax and claiming a salary expense deduction.
“In such a case it would be first taxable in the hands of the hospital and then allowed as deduction as salary expenditure. Thus, ultimately the amount would get taxed in the hands of the employee and not in the hands of the hospital. Hospitals can get credit for tax deducted under Section 194R of the Act by furnishing its tax return," CBDT said.