The Finance act 2022, has inserted a new section 194S, imposing a responsibility to deduct TDS before paying consideration to a resident person in respect of transfer of Virtual digital asset.
This section has been inserted and shall be effective from 1St July 2022.
This section requires a person making payment of consideration for transfer of Virtual digital asset to deduct amount equal to 1% of such amount as income tax thereon.
This amount is required to be deducted at the time of credit of such sum to the account of such resident or at the time of such payment whichever is earlier.
However, no tax shall be deduced if
- The total consideration payable by the specified person individually or in total during a financial year does not exceed fifty thousand rupees.
- The total consideration payable other than a specified person individually or in total during a financial year does not exceed ten thousand rupees.
So, the person is who is responsible to paying the consideration, before making the payment shall deduct TDS if the consideration payable is
- Wholly in kind or exchange of other physical asset, where no cash involved,
- Partly in cash and partly in kind and the cash component is not sufficient to meet the liability.
Where VDAs are transferred through an Exchange, the buyer would be crediting or making payment to the Exchange (either directly or through a broker). The Exchange then would be required to credit or make payment to the owner of VDA (either directly or through a broker).
A person shall be considered as specified person if: –
- An individual or Hindu undivided family (HUF) who does not have any income under the head “profit and gains of business or profession”; and
- 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.
Due Date to deposit TDS under Section 194S
| Particulars | Time Limit to deposit TDS |
| If the amount is credited in the month of March | On or before 7th April for Government Deductor On or before 30th April for Other Deductor |
| If the amount is credited in a month other than March | Within 7 days from the end of the month in which deduction is made |
TDS Return for Section 194S
The Deductor i.e. payer is liable to deduct tax under section 194S of the Income Tax Act. They shall file quarterly returns in Form 26Q within the following due dates:
| Quarter | Due Date |
| April to June | 31st July |
| July to September | 31st October |
| October to December | 31st January |
| January to March | 31st May |
TDS Certificate for Section 194S
Deductor i.e. payer shall issue a TDS Certificate to the deductee i.e. payee in Form 16A for TDS deducted on the transfer of virtual digital asset.
The deductee i.e. seller can claim the TDS Credit in the Income Tax Return. He/she can view the details of tax deducted under Section 194S in Form 26AS on the income tax website.