TDS on transfer of Virtual Digital Assets u/s 194S

This document covers

1. Background
2. What is Section 194S? and Details
3. What is Form 26QE and How to file online?

1. Background : TDS on payments for the transfer of VDA

Provisions relating to tax deduction at source (TDS) on virtual digital assets (VDA) were included in the Budget 2022 document. The Income Tax Act of 1961 was amended to include a new section 194S, which deals with TDS on the transfer of VDA.

2. What is Section 194S?

2.1 Applicability : Every person (buyer of VDA) who is responsible for paying any sum to any resident transferor (seller of VDA) is required to deduct TDS. Section 194S is applicable w.e.f 01st July 2022 2.2 Threshold Limit

1. Individual/HUF whose total sales or turnover does not exceed Rs 1 crore in case of business and Rs 50 lakhs in case of profession during the financial year immediately preceding the financial year in which such VDA is transferred : TDS is required to be deducted only if the consideration paid exceeds Rs 50,000
2. Other than Individuals/HUF mentioned above(Exchanges/any other person) : TDS is required to be deducted only if the consideration paid exceeds Rs 10,000.

2.3 Rate of TDS : The rate of TDS to be deducted is 1% on the consideration payable or paid.

2.4 Time of Deduction : The TDS needs to be deducted on the following times whichever is earlier.

1. Credit of amount to the account of resident Seller of VDA (or)
2. Payment of amount to resident Seller of VDA

2.5 Requirement of TAN : TAN is not required to be deducted for deduction of TDS u/s 194S.

2.6 TDS Return

1. The TDS deducted u/s 194S by Individual/HUF whose total sales or turnover does not exceed Rs 1 crore in case of business and Rs 50 lakhs in case of profession needs to be deposited to Government in Form 26QE (Challan cum Return)
2. The TDS deducted u/s 194S by other than individuals/HUF (exchanges/any other person) needs to be deposited to Government in Challan 281 and file Form 26Q returns quarterly. (TDS returns and payments are separate)

3. What is Form 26QE and How to file online?

3.1 Form 26QE is a challan cum return statement for reporting the transactions liable to TDS on purchase of Virtual Digital Assets (VDA) u/s 194S

3.2 Due Date: The due date for filing Form 26QE is within 30 days from the end of month in which tax deduction is made. 3.3 Form 26QE can be filed usinghttps://www.incometax.gov.in/iec/foportal/

3.4 Required Details for Filing Form 26QE: The following are the required details

1. PAN and Name of Buyer
2. PAN and Name of Seller
3. Address of Buyer and Seller
4. Mobile No and email id of Buyer and Seller
5. Total Value of Consideration of VDA
6. Date of Transfer of VDA
7. Date of Payment of Consideration of VDA and Date of TDS Deduction
8. Whether payment made in kind or in exchange of another VDA
9. Your Bank Payment Details to Pay