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    Circular 14 2022

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    shantX
    This circular provides guidance on tax deduction at source under section 194S of the Income Tax Act for transactions involving virtual digital assets that do not take place on an exchange. It clarifies that for peer-to-peer transactions, the buyer is responsible for deducting a 1% TDS on the transaction amount. It also addresses situations where consideration is paid in-kind or involves exchange of one VDA for another. In such cases, both parties must pay the applicable tax and provide proof before releasing the consideration. The circular also states that tax deducted under 194S is not required to be deducted under 194Q for the same transaction.

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    Circular 14 2022

    Uploaded by

    shantX
    34 views3 pages
    This circular provides guidance on tax deduction at source under section 194S of the Income Tax Act for transactions involving virtual digital assets that do not take place on an exchange. It clarifies that for peer-to-peer transactions, the buyer is responsible for deducting a 1% TDS on the transaction amount. It also addresses situations where consideration is paid in-kind or involves exchange of one VDA for another. In such cases, both parties must pay the applicable tax and provide proof before releasing the consideration. The circular also states that tax deducted under 194S is not required to be deducted under 194Q for the same transaction.

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    circular-14-2022 (1)

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    This circular provides guidance on tax deduction at source under section 194S of the Income Tax Act for transactions involving virtual digital assets that do not take place on an exchange. It clarifies that for peer-to-peer transactions, the buyer is responsible for deducting a 1% TDS on the transaction amount. It also addresses situations where consideration is paid in-kind or involves exchange of one VDA for another. In such cases, both parties must pay the applicable tax and provide proof before releasing the consideration. The circular also states that tax deducted under 194S is not required to be deducted under 194Q for the same transaction.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    34 views3 pages

    Circular 14 2022

    Uploaded by

    shantX
    This circular provides guidance on tax deduction at source under section 194S of the Income Tax Act for transactions involving virtual digital assets that do not take place on an exchange. It clarifies that for peer-to-peer transactions, the buyer is responsible for deducting a 1% TDS on the transaction amount. It also addresses situations where consideration is paid in-kind or involves exchange of one VDA for another. In such cases, both parties must pay the applicable tax and provide proof before releasing the consideration. The circular also states that tax deducted under 194S is not required to be deducted under 194Q for the same transaction.

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    of 3

    1

    Circular no. 14 of 2022


    F. No. 370142/29/2022-TPL (Part 1)
    Government of India
    Ministry of Finance
    Department of Revenue
    Central Board of Direct Taxes
    (TPL Division)
    *****

    New Delhi, dated 28th June, 2022

    Subject: Order under section 119 of the Income-tax Act, 1961 (the Act) in relation to tax
    deduction at source under section 194S of the Act for transactions other than those
    taking place on or through an Exchange

    Finance Act, 2022 inserted a new section 194S in the Act with effect from 1 st July 2022. The
    new section mandates a person, who is responsible for paying to any resident any sum by
    way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal
    to 1% of such sum as income tax thereon. The tax deduction is required to be made at the
    time of credit of such sum to the account of the resident or at the time of payment, whichever
    is earlier.

    This deduction is not required to be made in the following cases:-

    (i) the consideration is payable by a specified person and the value or aggregate value of
    such consideration does not exceed fifty thousand rupees during the financial year; or

    (ii) the consideration is payable by any person other than a specified person and the value
    or aggregate value of such consideration does not exceed ten thousand rupees during the
    financial year.

    The following are defined as “specified person” for the purposes of this provision:

    (i) An individual or Hindu undivided family (HUF) who does not have any income under
    the head “profit and gains of business or profession”; and

    (ii) An individual or HUF having income under the head “profits and gains of business or
    profession”, whose total sales/gross receipts/turnover from business carried on by him
    does not exceed one crore rupee or in case of profession exercised by him does not
    exceed fifty lakh rupee. This threshold is to be seen in the financial year immediately
    preceding the financial year in which the VDA is transferred.

    Sub-section (6) of section 194S of the Act authorises Central Board of Direct Taxes (CBDT)
    to issue guidelines, for removal of difficulties, with the approval of the Central Government.
    Accordingly, in exercise of the power conferred by sub-section (6) of section 194S of the
    Act, CBDT has issued guidelines in the form of Circular No. 13 of 2022 dated 22.06.2022 for
    transactions conducted on or through an Exchange. For all other transactions only the
    clarification provided in answer to question no 6 of that circular is applicable. The term
    2

    “Exchange” has been defined to mean any person that operates an application or platform for
    transferring of VDAs, which matches buy and sell trades and executes the same on its
    application or platform. Same definition applies to this circular.

    For all other transactions (not covered by circular no 13/2022), this circular is being issued
    under section 119 for proper administration of the Act.

    1) Liability to deduct tax at source under section 194S of the Act when the consideration
    is other than in kind

    According to section 194S of the Act, any person who is responsible for paying to any
    resident any sum by way of consideration for transfer of VDA is required to deduct tax. Thus,
    in a peer to peer (i.e. buyer to seller without going through an Exchange) transaction, the
    buyer (i.e person paying the consideration) is required to deduct tax under section 194S of the
    Act. The tax so deducted is required to be deposited with Government in accordance with the
    time and procedure prescribed in the Act read with the relevant provisions of the Income-tax
    Rules, 1962.

    After deduction, the deductor is required to furnish a quarterly statement (in Form No. 26Q)
    for all such transactions of the quarter on or before the due date prescribed in the Income-tax
    Rules, 1962. For specified person Form 26QE has been introduced.

    It may be clarified that the TDS shall be on consideration for transfer of VDA less GST.

    2) Liability to deduct tax at source under section 194S of the Act when the consideration
    is in kind or in exchange of VDA

    According to the proviso to sub-section (1) of section 194S of the Act, there could be a
    situation where the consideration is in kind or in exchange of another VDA or partly in kind
    and cash is not sufficient to meet the TDS liability. In this situation, the person responsible
    for paying such consideration is required to ensure that tax required to be deducted has been
    paid in respect of such consideration, before releasing the consideration.

    Thus, the buyer will release the consideration in kind after seller provides proof of payment
    of such tax (e.g. challan details etc.). In a situation where VDA “A” is being exchanged with
    another VDA “B”, both the persons are buyer as well as seller. One is buyer for “A” and
    seller for “B” and another is buyer for “B” and seller for “A”. Thus both need to pay tax with
    respect to transfer of VDA and show the evidence to other so that VDAs can then be
    exchanged. This would then be required to be reported in TDS statement along with challan
    number by both of them. This year Form 26Q has included provisions for reporting such
    transactions. For specified persons, Form 26QE has been introduced.

    3. Interplay between provision of section 194S and section 194Q


    3

    Without going into the merit whether VDA is goods or not, it is clarified that once tax is
    deducted under section 194S of the Act, tax would not be required to be deducted under
    section 194Q of the Act. Digitally signed by Ankit Jain
    DN: C=IN, O=Ministry of Finance,

    Ankit
    OU=Revenue,
    Phone=9590342e7d25c04c0975cb
    d2165cde704677f2b522827f64c76
    1bafded36bcd2,
    PostalCode=110001, S=Delhi,
    SERIALNUMBER=7c753d40cd424
    4c664a0557c7b52e10fa282a89e68
    837c51eccb00ead5494e20,

    Jain CN=Ankit Jain


    Reason: I am the author of this
    document
    Location: your signing location here
    Date: 2022-06-28 13:18:37
    Foxit Reader Version: 9.7.0

    Ankit Jain
    Under Secretary (TPL)-III

    Copy to:
    1. PS to FM/ OSD to FM/ PS to MoS(F)/ OSD to MoS(F)
    2. PPS to Secretary (Revenue)
    3. Chairman, CBDT & All Members, CBDT
    4. All Pr. DGsIT/ Pr. CCsIT
    5. All Joint Secretaries/ CsIT/ Directors/ Deputy Secretaries/ Under Secretaries of CBDT
    6. The C&AG of India
    7. The JS & Legal Adviser, Ministry of Law & Justice, New Delhi
    8. CIT (M&TP), Official Spokesperson of CBDT
    9. O/o Pr. DGIT (Systems) for uploading on official website.
    10. JCIT (Database Cell) for uploading on www.irsofficersonline.gov.in.

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