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 on July 1.
TDS on VDAs
The FY23 Budget prescribed had TDS on payment made in relation to transfer of VDAs (popularly called cryptos and includes non-fungible assets) at the rate of 1 per cent of such consideration above a monetary threshold. For this a new section – 194S – was added in the Income Tax Act.
According to new notification, the sum deducted for VDAs shall be paid to the credit of the Central government within a 30 days from the end of the month in which the deduction is made. Also, the person responsible for deduction of tax will furnish the required certificate within 15 days from the due date for furnishing the challan-cum-statement.
Tax needs to be deducted by the buyer. TDS provision would apply even if the consideration is paid partly or fully in kind. TDS is not required in cases where the aggregate consideration in a financial year is below ₹50,000, if payment is made by specified individual/Hindu undivided family, while it would be ₹10,000 in all other cases.
TDS on perquisites, benefits
Section 194R of the IT Act deals with deduction of tax “by a person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession”. Here, TDS will be applicable if the value of perquisites or benefits exceeds ₹20,000 in a year.
Under the new norms, social media influencers will be liable for TDS if they retain goods such as cars, mobile handsets, etc. Similarly, doctors will be charged tax for free samples of medicine or gifts received from pharmaceutical companies.
The tax department provided a breather on sales discounts, cash discounts and rebates allowed to customers by excluding them from the purview of the new Section as their inclusion would put sellers into difficulty. However, incentives other than those mentioned above will be covered. Also, incentives which are in cash or kind, for example, cars, TVs, computers, gold coins, mobile phones, sponsored trips, free tickets and medicine samples to medical practitioners will attract TDS. This list is not exhaustive but only illustrative.
.Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm, said, “The CBDT has pragmatically covered the practical scenarios to facilitate smooth implementation of the withholding on consideration for transfer of VDAs. Broadly, the responsibility to deduct TDS has been put on the exchanges which will increase the regulatory and compliance burden for them. This includes whether entering into a contractual agreement with the broker or customer, furnishing information on the transactions in the quarterly form 26QF. The exchanges have to further disclose these transactions in their tax return and maintain a proper trail. However, this would be helpful to the buyers and sellers both since they can enter into contracts with the exchange for passing the responsibility to deduct tax on their behalf in VDA to VDA transfers or otherwise as well.”