While presenting the Union Budget 2023, the Finance Minister Nirmala Sitharaman has clarified that the Finance Act, 2023 shall include an explanation clarifying that the cash perquisites shall be subject to tax under section 28 and 194R of the Income Tax Act, 1961.
“It is proposed to clarify that for taxability under section 28 of the Act as well for tax deduction at source under section 194R of the Act, the benefit could also be in cash,” the Union Finance Minister said.
A perquisite is a non-cash benefit granted by an employer to the employee. Under the Income Tax Act, a perquisite is defined as a benefit which an employee avails of or is entitled to on account of the employee’s job or position in the enterprise.
Clause 86 of the Bill seeks to amend section 194R of the Income-tax Act relating to deduction of tax on benefit or perquisite in respect of business or profession.
Sub-section (1) of the said section provides that any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession, by such resident, shall, before providing such benefit or perquisite, as the case may be, to such resident, ensure that tax has been deducted in respect of such benefit or perquisite at the rate of ten per cent. of the value or aggregate of value of such benefit or perquisite.
“It is proposed to insert a new Explanation 2 to the said section so as to clarify that the provisions of sub-section (1) shall also apply to any benefit or perquisite, whether in cash or in kind or partly in cash and partly in kind.”
This amendment will take effect from 1st April, 2023.
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