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TDS on Benefit or Perquisite in Respect of Business or Profession (Section 194R) [As per Circular No. 12 of 2022]Need to Introduce …
Section 115BBH | Section 194S | Circular No. 13 of 2022
Crypto Currency
• Decentralized Digital Asset Exchange based on Blockchain technology
• Mining
• Cryptography
• More than 1500 virtual currencies like Bitcoin, Litecoin, Ripple, Matic, etc.
• Not legal tender in India
• In 2018, the RBI banned banking facilities to crypto exchanges
• In 2020, the Supreme Court ruled out the ban
• MCA mandates disclosure of gain and loss in virtual currencies
• MCA mandates disclosure of the value of cryptocurrency as on the date of the balance sheet
For More Info Watch This Video – https://www.youtube.com/watch?v=ICoHSWi6HdU
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(Note: The Central Government may exclude any digital asset from this definition by issuing a notification.)
• Any Information, Code, Number, or Token
• Except: Indian or Foreign Currency
• Generated through cryptographic
• Providing Digital Representation of value
• Exchange with or without consideration or
• Functions as a store of value or unit of account
• use in any financial transaction or investment
• but not limited to investment schemes
• can be transferred, stored, or traded electronically
Non-Fungible Token
• or any other similar nature token
• means Digital Asset notified by CG
Digital Asset Notified by CG
Note: CG may exclude any digital asset from this definition by issuing a notification.
Taxable @ 30%
No deduction will be allowed against income from Virtual Digital Asset except acquisition cost.
Nothing is clear in this section whether it is business income, capital gain, or income from other sources.
Loss arising from transfer cannot be adjusted against any other income, and loss cannot be carried forward to succeeding years.
Loss under any other source of income cannot be adjusted against income from Virtual Digital Asset.
o Honorable Minister of State for Finance, Mr. Pankaj Chaudhary, while replying to MPs, clarified that infrastructure cost incurred on mining will not be treated as a cost of acquisition.
o Loss of transfer from one VDA will not be allowed to set off against income arising from the transfer of another VDA.
TDS on Payment on Transfer of Virtual Digital Assets [Section 194S] (Effective from 1st July 2022)
1. Since Section is applicable from 1st July 2022, but for the calculation of the threshold limit, Consideration shall be counted from 1st April 2022.
2. Since the TDS will be deducted at the time of credit or payment, whichever is earlier, such amount which has been credited or paid before 1st July 2022 would not be subjected to TDS under this section.
TDS where Section 194 is also applicable [Section 194S(4)]
Notwithstanding 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 (1)
Notwithstanding anything contained in Part B of this Chapter, a transaction in respect of which tax has been deducted by the e-commerce operator under sub-section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of this Chapter:
Note: After analysis of both sections found that Section 194S prevails over Section 194O.
Question 1: Whether the provision of section 194Q is also applicable to
Answer: No
Question 2: Whether consideration shall be on a gross basis or a net basis
Answer: On a net basis, after excluding GST or charges levied by the deductor for rendering services.
Case: Consideration for transfer of VDA is
• Wholly in Kind
• In Exchange for another VDA
• Partly in cash or partly in Kind, but part of the cash is not sufficient to deduct TDS
In the above cases payer ensures that the required tax has been paid in respect of the transfer.
As per the Circular, in case of Kind
• Buyer will release the consideration in kind after the seller provides proof of payment of such tax (eg, Challan detail, etc.)
• In a situation, Mr. Akash transfers Bitcoin to Mr. Ajay and receives Ripple from Mr Ajay
In this case, both are the buyers, so both need to pay tax and provide evidence to the other.
Note: In the above cases Payer reports this transaction in form 26Q. And in case of the specified person same has been reported in From 26QE.
If the transaction is through an exchange then Exchange will deduct TDS on the basis of written agreement between buyer/seller and exchange.
Exchange will deduct TDS for both legs of transactions and pay to the Government, and report the same in 26Q.
Case: Consideration for transfer of VDA is
• Wholly in Kind
• In Exchange for another VDA
• Partly in cash or partly in Kind, but part of the cash is not sufficient to deduct TDS
In the above cases payer ensures that the required tax has been paid in respect of the transfer.
As per the Circular, in case of Kind
• Buyer will release the consideration in kind after the seller provides proof of payment of such tax (eg, Challan detail, etc.)
• In a situation, Mr. Akash transfers Bitcoin to Mr. Ajay and receives Ripple from Mr Ajay
In this case, both are the buyers, so both need to pay tax and provide evidence to the other.
Note: In the above cases Payer reports this transaction in form 26Q. And in case of the specified person same has been reported in From 26QE.
If the transaction is through an exchange then Exchange will deduct TDS on the basis of written agreement between buyer/seller and exchange.
Exchange will deduct TDS for both legs of transactions and pay to the Government, and report the same in 26Q.
With a 30% tax on VDA income and 1% TDS on transactions, compliance with Sections 115BBH and 194S is crucial for cryptocurrency traders, investors, and businesses.
At E Accountax Manager, we provide expert assistance in taxation, TDS compliance, and regulatory filings to ensure your business stays compliant with the latest laws. Our team of professionals helps businesses and individuals navigate complex tax structures, ensuring seamless financial management. Whether it’s business registration, tax advisory, or GST compliance, we are your trusted partner.
CA Jitendra Agarwal, a Chartered Accountant, is an experienced Income Tax Advisor with a proven track record in tax planning and compliance.
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