Free tool
TDS on rewards calculator
This calculator checks whether TDS applies to a reward you give a dealer, retailer or tradesperson, and how much to deduct. Business rewards attract TDS at 10% once a recipient's total for the financial year exceeds ₹20,000 — under Section 393 of the Income-tax Act, 2025, which replaced Section 194R from 1 April 2026.
- ₹20,000 yearly threshold per recipient
- TDS on the full value once crossed
- Indicative — confirm with your tax adviser
Your results
- Total for the year
- ₹25,000
- Threshold
- ₹20,000
- Value TDS applies to now
- ₹25,000
- TDS at 10%
- ₹2,500
This reward takes the year's total past ₹20,000, so TDS applies to the full value, including earlier rewards. Assumes TDS was deducted on earlier rewards once the threshold was crossed and the recipient has furnished PAN (a higher rate can apply without PAN). Under Section 393 of the Income-tax Act, 2025 (formerly Section 194R). Indicative only — confirm with your tax adviser.
The rule
How TDS on rewards works
When a business gives a benefit or perquisite — such as loyalty rewards, gifts or incentives — to someone in connection with their business, it may need to deduct tax at source. Section 194R of the Income-tax Act, 1961 introduced this from 1 July 2022. From 1 April 2026 the same requirement sits in Section 393 of the Income-tax Act, 2025.
The threshold is ₹20,000 per recipient per financial year, counted from 1 April. Once a recipient's total crosses it, TDS at 10% applies to the full value of the benefits, not just the part above ₹20,000. That's why the calculator asks what you've already given the recipient this year.
A higher rate can apply if the recipient hasn't furnished PAN, and benefits in kind raise practical questions about how the tax is paid. Treat this calculator as a quick check and confirm specific cases with your tax adviser.
In practice
Keeping a rewards program compliant
The hard part is not the arithmetic, it's tracking. A partner may earn from several schemes and redeem many times in a year, and the threshold applies to their total. Spreadsheets struggle to keep that running total accurate across programs.
Reward Max tracks reward value per recipient across the financial year, verifies PAN during Digital KYC, calculates and deducts TDS once the threshold is crossed, and generates TDS certificates and compliance reports.
- Track rewards per recipient across every scheme
- Verify PAN at enrolment
- Deduct automatically once the threshold is crossed
- Keep certificates and reports for audit
Worked example
A worked example (illustration only)
This illustration uses the calculator's starting values and assumes the recipient has furnished PAN. A retailer has already received rewards worth ₹15,000 this financial year, and you are about to give a reward worth ₹10,000.
The year's total becomes ₹25,000, which crosses the ₹20,000 threshold. Because TDS applies to the full value once the threshold is crossed — not just the excess — the ₹15,000 given earlier, on which no TDS was deducted, is included. TDS at 10% on ₹25,000 is ₹2,500.
If the same retailer later receives another ₹5,000 reward in the same year, the threshold has already been crossed, so TDS at 10% applies to that ₹5,000: ₹500.
This follows Section 393 of the Income-tax Act, 2025 (formerly Section 194R). How benefits in kind, missing PAN and specific reward types are treated can vary, so treat the result as indicative and confirm with your tax adviser.
FAQs
TDS on rewards FAQs
Does the threshold reset every year?
Yes. The ₹20,000 threshold is counted per recipient for each financial year, from 1 April.
What if we didn't deduct TDS on earlier rewards?
Once the year's total crosses ₹20,000, TDS applies to the full value including earlier rewards. Speak to your tax adviser about how to handle amounts already paid out.
Is Section 194R still applicable?
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act, and the provision formerly in Section 194R now sits in Section 393. The 10% rate and ₹20,000 threshold are the same.
What is the threshold for TDS on rewards?
₹20,000 per recipient per financial year, counted from 1 April.
Is TDS deducted on the full amount or only the excess?
Once the year's total exceeds ₹20,000, TDS applies to the full value of the benefits, not just the excess.
What rate applies?
10% of the value of the benefit. A higher rate can apply where the recipient hasn't furnished PAN — check with your adviser.
Does this cover gift vouchers and merchandise?
Benefits in cash or in kind given in connection with business can be covered. Confirm specific reward types with your tax adviser.
Can TDS be handled automatically?
Yes. Reward Max tracks rewards per recipient, verifies PAN, deducts TDS once the threshold is crossed and issues certificates and reports.
Take TDS off finance's list
See Reward Max track and deduct TDS on a live program.