What is Section 194R (business perquisites)?
Reviewed by CA Apurav GargLast reviewed
In short
Section 194R requires a business giving a benefit or perquisite, such as free products to an influencer, to deduct TDS on its value above a yearly limit per recipient. It becomes section 393 under the Income-tax Act, 2025.
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What it covers
Section 194R of the Income-tax Act, 1961 came into force on 1 July 2022. From 1 April 2026 the same requirement is in section 393(1), Table S. No. 8(iv) of the Income-tax Act, 2025.
A business that gives a resident any benefit or perquisite arising from business or profession, in cash or in kind, must deduct TDS on its value when the year's total to that person crosses the limit in the law. For a D2C brand, the commonest cases are:
- products sent to influencers and creators that they keep;
- free trips, event passes or gifts to distributors, retailers or resellers for meeting targets;
- products given to a business partner in place of a cash fee.
Small individual and HUF businesses below the turnover limit in the law are not required to deduct.
What the CBDT has clarified
CBDT Circulars No. 12/2022 and 18/2022 were issued under section 194R. They remain the main guidance on the same requirement under the 2025 Act, read with its new section number:
- A product given to an influencer for a video and returned afterwards is not a benefit. If it is kept, it is.
- Value is fair market value. If the giver bought the item, the purchase price; if it makes the item, the price it charges customers.
- Sales discounts, rebates and price cuts given to customers are left out.
- Where the benefit is in kind, the giver must make sure the tax has been paid before releasing it.
The GST side
GST asks a separate question: was anything received in return?
- Free samples and gifts given without anything in return: no GST is charged, but the input tax credit on them is blocked under section 17(5)(h) of the CGST Act and must be reversed.
- Products given in exchange for promotion (barter): the influencer's content is consideration, so the brand's products are a supply in exchange for a service. GST may be payable on the products, valued under the valuation rules, and the influencer, if registered, charges GST on the service.
The Influencer Barter calculator works through both.
What goes wrong
- No records of products kept. Keep a dispatch and return log per creator.
- Counting only cash fees. Cash fees to influencers fall under other TDS provisions; products kept fall under this one.
- Missing the year's total. The limit is per recipient for the whole year, so track small consignments to the same person.
Example in rupees
A skincare brand works with one influencer during the tax year:
| What the influencer got | Kept? | Value for TDS |
|---|---|---|
| Products for an unboxing video, sent back after the shoot | Returned | ₹0 |
| Products kept after a launch campaign (price charged to customers) | Kept | ₹18,000 |
| Products kept after a festive campaign | Kept | ₹14,000 |
| Benefits kept in the year | ₹32,000 |
The ₹32,000 is above the yearly limit, so TDS applies on the whole ₹32,000, not just the excess. Because the benefit is given in kind, there is no cash payment to deduct from: the brand must make sure the tax is paid before it hands over the products, either by paying it itself or by collecting it from the influencer. It reports the TDS in its TDS statement, and the influencer sees it in Form 168. The figures are illustrative.
Legal reference: Income-tax Act, 2025: section 393(1), Table S. No. 8(iv), from tax year 2026-27; Income-tax Act, 1961: section 194R, up to 31 March 2026; CBDT Circulars No. 12/2022 and 18/2022; CGST Act, 2017: section 17(5)(h)
Related terms
Work it out for your business
Want help applying this to your own accounts?
We handle bookkeeping, GST and TDS for D2C and marketplace sellers, and can walk you through how this works in your business.
General information only, not professional advice. Rules and rates change — check the official source before you act.