Private Companies Must Deduct Tax At Source For Bonus Or Rights Shares: Check CBDT Guidelines | 5 Points

New Delhi: The Central Board of Direct Taxes (CBDT) on Tuesday issued another circular to further clarify issues arising on deduction of tax at source under the newly-inserted Section 194-R in respect of benefits or perquisites provided to residents in cash or in kind in the course of business or profession.Also Read – Income Tax Return: CBDT Issues Refunds of Over Rs 1.14 Lakh Crore

Here’s your 5-point cheat-sheet to this big story on tax norms:

1. As per the circular, now bank and financial institutions need not deduct tax at source in respect of benefits provided to its borrowers by waiver of loan or advance by way of one-time settlement.
2. Similarly, a company in which the public is substantially interested need not deduct tax at source while issuing bonus or rights shares.
3. The implication of this clarification will be that a company in which public is not substantially interested will be required to deduct tax at source while issuing bonus or rights shares despite such receipt of bonus or right shares being not taxable in the hands of the shareholders.
4. The reasoning given in this circular for exempting a company in which the public is substantially interested from deduction of tax at source while issuing bonus or rights shares equally applies to a private company in which the public is not substantially interested, experts said.
5. Experts say this circular may be fishing in troubled waters as it might be differentiating between taxpayers. Experts also wonder if the legislative intent is being bypassed by such circulars.

(With IANS inputs) Also Read – Daily Wager in Bihar’s Khagariya Gets Income Tax Notice of Rs 37.5 Lakh

Also Read – Attention! Paying Cash Over Set Limit At Hospitals, Banquet Halls, Can Land You In Trouble. Read Deets HERE