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Writer's pictureVenkatesh Prabhu

Taxation on Crypto (Section 194S)


Key Points to Note

  • Amendment effective from 1st April, 2023 and will accordingly apply AY 2023-24 (FY 2022-23) onwards. (Tax on VDA)

  • No benefit of basic exemption limit is available.

  • No deduction under Chapter VI – A

  • No benefit of Rebate u/s 87A

  • No deduction in respect of any expenditure (other than cost of acquisition) or allowance or set off of any loss shall be allowed.

  • No set off of any loss arising from transfer of virtual digital asset shall be allowed against any income and such loss shall not be allowed to be carried forward to subsequent assessment years.


TDS Applicability

  • Effective 1st of July, 2022, Proposed TDS (section 194S) on payment for transfer of virtual digital asset to a resident at the rate of 1% of such sum.

  • In case if cash is not sufficient to meet the liability of deduction of tax, then Payer shall release the payment only if either-

  1. He has collected the amount equivalent to TDS amount from the payee, or

  2. He insists the payee to make the payment of TDS on his own & submit the proof to the payer.

  • TDS will be applicable on any transfer of virtual digital asset. Therefore, if for eg. Bitcoin is sold and converted to USDT, then this will also be considered a transfer and hence TDS is applicable.

  • No TDS if the payer is the ‘specified person’ and the value of consideration to a resident is less than Rs. 50,000 during the financial year. In any other case, the said limit is proposed to be Rs. 10,000 during the financial year.

  • Proposed that if tax has been deducted under section 194S, then no tax is to be collected or deducted in respect of the said transaction under any other provision of the Act.


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