Section 194S of Income Tax:
- Section 194S Introduced by Finance Act, which became effective on July 1, 2022.
- Under this section it conveys that If you trade in virtual digital assets (VDAs), which include cryptocurrencies and non-fungible tokens (NFTs), TDS is required to deduct on payment on such transfer of virtual digital assets.
Rate of TDS u/s 194S:
Under this section TDS rate is 1%, if the value of the transaction is more than Rs 10,000 or Rs 50,000 in the case of specified persons in a particular year.
Example:
Santosh has bought cryptocurrency worth Rs 60,000. So, deduct TDS @1% of Rs 60,000 by santosh on payment and pay the balance of Rs 59,400 to the seller. Santosh need to deposit Rs 6,00 with the government.
Meaning of Specified Person:
A Specified Person means:
- Individual or HUF who does not have income under business and profession
- Individual or HUF having business income up to Rs 1 crore
- Individual or HUF having professional receipts up to Rs 50 lakh
Filing of TDS Return
TDS returns is filed by persons (other than specified person) in Form 26Q by quarterly.
For Specified Person:
- In case of specified person, The payment will be calculated from the end of the month in which the deduction is made and it will be accompanied by the challan-cum-statement in Form No. 26QE.
- Form No. 16E which deals with TDS Certificate issued by a Payer for payment of a commission, brokerage, contractual fee has been amended and new insertions have been made that will come into effect from 1st of July, 2022.
Transfer of a VDA (in cash) through an Exchange (who does not own the VDA)
If the transfer of VDA takes place on or through an exchange (who does not own the VDA), then not many parties are involved, and the buyer or his broker is required to deduct TDS.
Alternatively, the exchange may enter into an agreement with the buyer or their broker stating that the exchange shall pay the due tax on or before the due date of that quarter. In this case, the exchange would be required to furnish a quarterly report in Form No. 26QF on or before the due date.
