New TDS rules to apply on doctors, social media influencers from July

The provision was introduced in the Finance Act of 2022 to bring such benefits derived from sales promotion expenditure by businesses under the tax ambit and to ensure that they report it in their tax returns and also pay tax.

If a social media influencer retains the equipment or the product given by the company for sales promotion, they have to pay TDS on such benefits.

“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 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 prerequisite for the purposes of section 194R of the Act (the TDS provision)," the CBDT noted.

The CBDT clarified that TDS will not apply if the equipment is returned to the company. However, if it is kept by the individual, the tax will be deducted based on the nature of the benefit or perquisite.

Examples of where the tax will be applicable include perquisites in cash or in kind such as car, television, computers, gold coin, mobile phone, foreign trips, and free tickets for events given to promote sales.

Free medicine samples given by a company to a doctor, who is an employee of a hospital, or is a consultant, will fall under the purview of TDS.

The TDS will be cut by the hospital as the doctor is an employee of the hospital.

The CBDT explained, “In such a case it would be the 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. The hospital can get a credit of tax deducted under section 194R of the Act by furnishing its tax return."