The Income Tax department has notified compliance of TDS (Tax Deducted at Source) for virtual digital assets (VDA), perquisites and benefits, among others.
- The new norms will come into effect from July 1, 2022.
- With introduction of Section 194S in the Income-tax Act 1961 through the Finance Act, 2022, a tax deducted at source (TDS) of 1 per cent will be levied on transfer of VDAs if the value of transactions exceeds Rs 10,000 in a year.
- The purchaser of a virtual digital assets (VDA) is required to deduct 1% of the amount paid to the seller (resident Indian) as income tax deducted at source (TDS).
- The tax is required to be deducted at the time of credit of amount or at the time of payment to the resident individual, whichever is earlier.
- The tax will be deducted only if the amount paid exceeds the specified limit, stated CBDT.
- TDS is not required in cases where the aggregate consideration in a financial year is below Rs 50,000, if payment is made by specified individual/Hindu undivided family, while it would be Rs 10,000 in all other cases.
- If the seller is an exchange and the buyer is any person and the cash sales takes place through an exchange, then the buyer has to deduct taxes.
About virtual digital assets
- The Finance Bill 2022 has defined virtual digital assets in the newly-inserted clause (47A) under Section 2 of the Income Tax Act, 1961.
- VDA has been defined to mean any information or code or number or token generated through cryptographic means or otherwise. And which can be transferred, stored or traded electronically.
- The definition of VDA also specifically includes non-fungible token, i.e. NFT, or any other token of similar nature, by whatever name is called.
- The CBDT has defined four primary VDAs — bitcoin, ether, USD Tether and USD Coin — for the purpose of tax deduction on lesser known cryptocurrencies.
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