Budget 2023 : IDSA recommends exemption under section 194R

New Delhi : The Government of India in the Budget for 2022 introduced a new section 194R –“Deduction of tax or perquisite in respect of business or profession.” Which became applicable from July 01, 2022.
In accordance with the provisions of this new section, a person (or corporate entity) who is responsible for providing any benefit or perquisite to a resident, should deduct tax at source @ 10% of the value or aggregate of value of such benefit or perquisite before providing such benefit or perquisite in cash or in kind.
One of the business activities that get impacted due to these new provisions is the national and international trips or events that are organised by business entities to motivate or felicitate their employees or associates.
While we appreciate the rationale behind introducing this new provision however, we would like to request the following amendment in the same – As per the newly inserted provision, all events where the recipients or the beneficiaries are provided free participation or where their trips are sponsored, shall now come under the purview of TDS deduction.
In our opinion, considering the fact that Covid-19 pandemic created havoc on the Indian hospitality sector, the Government of India should encourage organizing of domestic events and trips. This would result in increase in revenue of our domestic players and to the revival of the hospitality sector.
In order to achieve the same, one initiative could be to provide an exemption under Section 194R only to those events or trips that are organized within India. In the present scenario where both national and international events or trips are being brought under the purview of Section 194R at the same rate, corporate entities shall not find any merit in organizing such events of trips within India as organizing the same in a foreign country adds aspirational value to it.
If an exemption is provided for events and trips within India, the corporate entities shall feel encouraged to organise the same within India which’ll add to the revenue of the domestic hospitality players thereby increasing the tax contribution by the sector.
We sincerely believe that the above suggestion shall be given due consideration by the officials and we look forward to discussing the same in detail, if required.