The new section 194S of the Income-tax Act of 1961 will be applicable as of July 1st, 2022, according to guidelines published by the Central Board of Indirect Taxes and Customs.
According to the new section, anyone who has pay a resident any money as payment for the transfer of a virtual digital asset (VDA) must deduct income tax on that money in an amount equivalent to one percent of the payment. The tax must be deducted at the time the resident’s account is credited with the amount in consideration.
In the following circumstances, the aforementioned deduction is not need to be made:
The consideration is payable from a certain party and its value, or the aggregate of its value, does not exceed 50,000 rupees within the fiscal year;
The value or aggregate value of the consideration is not above than ten thousand rupees throughout the financial year and is payable by any person other than a specified person.
For all such transactions during the quarter, the Exchange would be required to file a quarterly statement (in Form No. 26QF) on or before the deadline outlined in the Income-tax Rules, 1962. All of these transactions would need to be included in the Exchange’s income tax return, which would also need to be provided.
It is made clear that the tax that must be deducted in accordance with Section 194S of the Act will be applied to the “net” consideration after deducting GST and other fees the deductor may charge for providing a service.