Section 194R casts an obligation on the person responsible for providing any benefit or perquisite to a resident, to deduct tax at source @10%. There is no further requirement to check whether the amount is taxable in the hands of the recipient or under which section it is taxable.
Provided further that the provisions of this section shall not apply in case of a resident where the value or aggregate of value of the benefit or perquisite provided or likely to be provided to such resident during the financial year does not exceed twenty thousand rupees:
Provided also that the provisions of this section shall not apply to a person being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover does not exceed one crore rupees in case of business or fifty lakh rupees in case of profession, during the financial year immediately preceding the financial year in which such benefit or perquisite, as the case may be, is provided by such person.
Unlike Section 195 where there is a requirement to check whether the sum payable to a person is chargeable to tax under the provision of the Income-tax Act or Double Taxation Avoidance Agreement (DTAA), no such requirement is there in section 194R. Hence, there is no requirement for the deductor under section 194R to verify whether the amount is taxable in the hands of the recipient or the section under which it is taxable.
A few examples of 194R would include travel packages, gift cards or vouchers, products under incentive schemes or the usage of business assets, among others.
https://cacmacsyouth.com/wp-content/uploads/2022/07/circular-no-12-2022.pdf