The Income Tax department’s new rule mandating a 10 per cent tax deducted at source (TDS) on free medical samples has incurred the wrath of medical professionals, who said it would lead to stoppage of free samples to doctors who used to provide them to indigent patients.

From July 1, 2022 doctors among others are required to pay 10 per cent TDS on freebies given to them such as free samples if the value of gifts is over Rs. 20,000, according to new guidelines issued by the Central Board of Direct Taxes (CBDT).

In case the doctor is an employee of a hospital, the hospital will have to pay the TDS. The hospitals can also put the TDS down on the said doctor’s salary as an expenditure, according to the CBDT.

Further, TDS also includes perquisites in cash or in kind such as cars, electronics and so on.

The guidelines are a part of the Finance Act, 2020 to widen the tax base and ensure that the people who are benefiting from sales promotions report the same in their tax returns and pay 10 per cent TDS on what the benefit is worth. The government has amended the Finance Act, 2022 to accommodate the same, by including Clause 58, which seeks to insert Section 194R in the Act.

Taking exception to this, OMAG secretary general said “As per Section 44AA, if a doctor’s annual income is over Rs. 2.5 lakh, he/she needs to maintain a ‘book of accounts’ for taxation. Most doctors pay taxes at the rate of 30 per cent every year. Imposition of 10 per cent TDS will place further burden on them.”

Talking about TDS on freebies provided to doctors by drugmakers including cars, holiday packages, sponsorships etc. he said “Ethical guidelines of the Medical Council of India (MCI) have barred doctors from taking freebies from pharma companies. The imposition of TDS will push doctors to become members of various medical associations to avail such benefits. Doctors’ associations registered under the Societies Registration Act are not liable to pay taxes.”

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