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Section 194S of Income Tax Act: Transfer of Virtual Digital Assets

Written by: CHETNAA GOYAL Posted on: 14 February, 2023
209 (1)

TDS On Transfer Of Virtual Digital Asset (VDA) Crypto Currency

Virtual Digital Asset means any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme; and can be transferred, stored or traded electronically.

After section 194R of the Income-tax Act, section 194S shall be inserted effect from the 1st day of July, 2022, i.e  Any person responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset, shall, at the time of credit of such sum to the account of the resident or at the time of payment of such sum by any mode, whichever is earlier, deduct an amount equal to 1% of such sum as income-tax thereon. 

Provided that in a case where the consideration for transfer of virtual digital asset is

  1. wholly in kind or in exchange of another virtual digital asset, where there is no part in cash or

  2. partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of such transfer,

The person responsible for paying such consideration shall, before releasing the consideration, ensure that tax required to be deducted has been paid in respect of such consideration for the transfer of virtual digital asset.

Due date for TDS Payment under section 194S

The new rule provides for the due date for payment of TDS under section 194S within 30 days from the end of the month in which tax is deducted in Form No. 26QE. The tax is required to be deposited online electronically. Form No. 26QE is an online challan-cum-statement of tax deducted under section 194S.

Further, the deductor shall issue the TDS certificate to the deductee in Form 16E within 15 days from the due date of furnishing the challan-cum-statement in Form No. 26QE after the same is downloaded from the income-tax portal.

Conditions 

  • The provisions of sections 203A (requirement to obtain TAN) and 206AB (higher rate of TDS in case of non-filer of return of income) shall not apply to a specified person.

  • Further, no tax is to be deducted in case the payer is the specified person and the value or the aggregate of such value of consideration to a resident is less than Rs. 50,000 during the financial year. In any other case, the said limit is Rs. 10,000 during the financial year.

  • Not with standing anything contained in section 194-O, in case of a transaction to which the provisions of the said section are also applicable along with the provisions of this section, then, tax shall be deducted under sub-section 194S.

  • Where any sum referred to in sub-section (1) is credited to any account, whether called "Suspense Account"or by any other name, in the books of account of the person liable to pay such sum, such credit of the sum shall be deemed to be the credit of such sum to the account of the payee and the provisions of this section shall apply accordingly.

  • If any difficulty arises in giving effect to the provisions of this section, the Board may, with the prior approval of the Central Government, issue guidelines for the purposes of removing the difficulty.

  • Every guideline issued by the Board under sub-section (6) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person responsible for paying the considerationon transfer of such virtual digital asset.

Explanation

For the purposes of this section "specified person" means a person, 

  1. being an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business carried on by him or profession exercised by him 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 virtual digital asset is transferred.

  2. being an individual or a Hindu undivided family, not having any income under the head "Profits and gains of business or profession".

 

For more details, Please watch our video

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CHETNAA GOYAL

Chetnaa Goyal one of the co-founder of TaxSmooth. An Qualified Chartered Accountant. More than 12 years of Experience in Direct Taxation. having own Taxation Practice in Delhi. Expertise in Income Tax Cases, Return filing, Tax Planning, Tax Advisory etc.

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