TDS on transfer of Virtual Digital Assets (VDA) – Section 194S
TDS u/s 194S TDS on the transfer of VDAs
Introduction of section 194S
The Government has introduced Section 194S Under Budget 2022 to impose TDS on the transfer of crypto currency, NFT and other VDAs (Virtual Digital Assets) w.e.f. 1st July 2022.
Let us understand the basic requirements of this section:
What is a Virtual Digital Asset (VDA)?
As per the provisions of section 194S, VDA i.e. Virtual Digital Asset includes the following:
- Cryptocurrency – information or code or number or token generated through cryptographic means or otherwise
- NFT – Non-Fungible Token or any other token of similar nature
- Any other digital asset notified by the central government in the official gazette
Who shall deduct TDS u/s 194S?
A person (resident or non-resident), who is responsible for paying to any resident any sum by way of consideration of transfer of VDA i.e. Virtual Digital Asset.
When to deduct TDS?
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.
Rate of deducing TDS u/s 194S
TDS @ 1% on consideration amount has to be deducted. GST component has to be excluded from consideration for the purpose of deducting TDS.
Non-Applicability of 194S
- If payee is a non-resident.
- If value or aggregate value of such consideration does not exceed Rs. 10,000 during a financial year. This threshold limit is Rs. 50,000 for a specified person.
“Specified person” means:
- An individual or HUF who does not have any income from business or profession, or
- An individual or HUF having income from business or profession where the gross receipts/total sales/ turnover does not exceed Rs. 1 Crore in a business or Rs. 50 Lakh in case of profession in the immediate preceding financial year in which the VDA is transferred.
What if the consideration is wholly in kind or partly in cash and partly in kind?
In a case where the consideration for transfer of virtual digital asset is—
- wholly in kind or in exchange of another virtual digital asset, where there is no part in cash; or
- 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 Depositing TDS u/s 194S
The due date for depositing TDS is 7th from the end of the month in which TDS was deducted. For the month of March, the due date is 30th April for deductors other than government.
Different cases (Who is required to deduct TDS?)
1. When the transaction is not in kind;
a. and is done through an exchange, TDS u/s 194S is required to be deducted by the exchange, or
b. buyer is a broker, TDS u/s 194S is required to be deducted by the broker, or
c. seller is a broker and transaction is done through an exchange, TDS u/s 194S is required to be deducted by the exchange, or
d. Both broker and exchange are involved in the transaction, TDS is to be deducted by both where no written agreement exists, otherwise, TDS is to be deducted as per the agreement where written agreement exists.
2. When the transaction is in kind;
a. And is done through an exchange, TDS is to be deducted by both buyer and seller where no written agreement exists between exchange and seller/buyer, otherwise, TDS is to be deducted b the exchange where written agreement exists
b. Seller is a broker and transaction is done through an exchange, TDS is to be deducted by both broker and buyer where no written agreement exists between broker and buyer, otherwise, TDS is to be deducted by the exchange where written agreement exists
Other Points to remember
1. Section 194Q would not be applicable if TDS is deducted u/s 194S
2. For FY 2022-23, VDA transfer during the period 01.04.2022 to 30.06.2022 shall also be considered for threshold value of Rs. 50,000/- or Rs. 10,000/-
3. The provisions of sections 203A and 206AB shall not apply to a specified person.