New TDS Rule From July 1: Doctors And Social Media Influencers Need To Pay Tax On Freebies

Social media influencers will be liable to pay TDS if the equipment given to them as part of marketing efforts by a company is retained by the person

New Delhi: Coming July, doctors and social media influencers will be subjected to a new rule which mandates a 10 per cent tax deducted at source (TDS) on freebies they receive from businesses for sales promotion. The Central Board of Direct Taxes (CBDT) has listed the rules under the new provision that explains the circumstances in which the new tax deducted at source (TDS) provision will be applicable.

A section was introduced in the I-T Act which mandates deduction of tax at source at the rate of 10 per cent by any person, providing any benefit or perquisite exceeding Rs 20,000 in a year to a resident, arising from the business or profession of such resident.

The provision was included to widen the tax base and to make sure that businesses which benefit from such sales promotion expenditure report it in their tax returns and pay tax on what the benefit is worth, according to the publication Mint report.

What does it mean for social media influencers?

Social media influencers will be liable to pay TDS if the equipment given to them as part of marketing efforts by a company is retained by the person. However, TDS will not be applicable in case it is returned to the company, noted CBDT.

“Whether this (the product given for sales promotion activity in social media) is benefit or perquisite will depend upon the facts of the case. In case of benefit or prerequisite being a product like a 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 prerequisite for the purposes of section 194R of the Act (the TDS provision)," said CBDT, according to the Mint report.

If the product is retained, then it will be in the nature of benefit or prerequisite and tax is required to be deducted accordingly under section 194R of the Act, CBDT said. Also, note that Section 194R will apply to sellers giving incentives, other than discounts or rebates, which are in cash or kind, like cars, TV, computers, gold coins and mobile phones.

What about a doctor working at a hospital??

In case of free medicine sample provided by a company to a doctor employed by a hospital, or is a consultant, is also covered under this TDS provision. It means that the TDS will be first deducted from the hands of the hospital on account of the doctor being an employee of the hospital. The hospital may treat this as a benefit given to the doctor, deduct income tax on it and later claim a deduction for this as a salary expenditure.