CBDT Notifies TDS u/s 194S on transactions other than those taking place on or through an Exchange

The Central Board of Direct Taxes (CBDT) vide Circular no. 14 of 2022 dated 28th June 2022 notifies TDS u/s 194S on transactions other than those taking place on or through an Exchange.

The Circular is Given Below:

Finance Act, 2022 inserted a new section 194S in the Act with effect from 1st 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, which ever 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 “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.

To Read Full Circular Download PDF Given Below: