Section 194S

Section 194S — the law in short

What the courts have decided on section 194S, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Raunaq Prakash Jain v ITO ITATHelps taxpayerValidity unconfirmed
  I sold Bitcoin in FY 2020-21, before the VDA regime — capital gains or income from other sources?
  Capital gains, for that year. For AY 2021-22 Bitcoin was a capital asset under s.2(14), so the gain fell under the capital gains head and not s.56, and a holding period of more than three years made it long-term and eligible for s.54F relief on reinvestment in property. This decides only years before the virtual digital asset regime took effect on 1 April 2022; for years inside that regime s.115BBH governs and this answer does not carry across.
• CBDT Guidance Note on crypto-asset reporting CBDT Circulars & InstructionsHelps departmentValidity unconfirmed
  Do I have to list every crypto trade separately in Schedule VDA, or can I report the net gain?
  Every trade separately. Schedule VDA requires transaction-wise disclosure — type of VDA, date of acquisition, date of transfer, sale consideration, cost of acquisition, income from the transfer and the s.194S TDS — and consolidating gains across transactions is treated as a compliance error. Alongside that, crypto-asset service providers have their own duty to report crypto transactions in the prescribed form and to run due diligence to identify reportable persons.
• CBDT Notification 19/2026 on crypto reporting CBDT Circulars & InstructionsHelps department
  Do I have to report my crypto holdings now, or does the exchange do it for me?
  The platform does. Reporting Crypto-Asset Service Providers — Indian exchanges, custodians, wallet providers, broker-dealer platforms and offshore providers servicing Indian users — must report crypto-asset transactions in Form 167 under rules 241 to 244. The compliance burden is placed on the platforms, not on individual investors.
• CBDT Circular 23/2022 - the VDA regime's first year CBDT Circulars & InstructionsCuts both ways
  From which assessment year does the flat 30% charge on crypto actually begin, and has the Board itself said anything about set-off?
  Assessment year 2023-24, that is financial year 2022-23. Paragraph 6 of the Board's Explanatory Notes to the Finance Act 2022 records that the s.115BBH amendment "takes effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years". The same paragraph restates the set-off bar in the Board's own words - no set off of any loss arising from transfer of a virtual digital asset against any income computed under any provision of the Act, and no carry forward. The 1% under s.194S is separately recorded as effective from 1st July, 2022.
• Statutory position — section 194S: one per cent on payment for transfer of a VDA, from 1 July 2022 CBDT Circulars & InstructionsCuts both ways
  We are paying for crypto bought from an Indian seller. Do we deduct tax, at what rate, and is there a threshold below which we can ignore it?
  Yes, from 1 July 2022. Section 194S requires any person responsible for paying a resident any sum by way of consideration for transfer of a virtual digital asset to deduct one per cent of that sum, at the time of credit to the resident's account or at the time of payment, whichever is earlier. No tax is deducted where the payer is a 'specified person' and the value or aggregate value of the consideration does not exceed Rs 50,000 during the financial year, or where the payer is anyone else and it does not exceed Rs 10,000 during the financial year. Where the consideration is wholly in kind, or is a swap of one VDA for another, or the cash part is not enough to fund the deduction, the payer must ensure the tax has been paid BEFORE releasing the consideration.
• CBDT Notifications 74 & 75/2022 CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  Are gift cards, loyalty points and NFTs backed by a physical asset caught by the crypto tax rules?
  No. Notification 74/2022 excludes gift cards, vouchers, reward points and loyalty cards from the s.2(47A) definition, and Notification 75/2022 excludes physical NFTs — tokens whose transfer results in transfer of ownership of an underlying tangible asset. What remains inside the regime is crypto-assets and notified NFTs.
• Notification 73/2022 — Form 26QF for exchanges CBDT Circulars & InstructionsCuts both ways
  The exchange agreed under the CBDT guidelines to pay the 1% on its own sale to me. How does that get reported, and where do I see it?
  Through Form 26QF, filed quarterly by the exchange. Where an exchange has agreed, under the guidelines issued under s.194S(6), to pay the tax on a transfer of a virtual digital asset owned by it instead of the buyer deducting, rule 31A(1) requires the exchange to deliver a quarterly statement of those transactions in Form 26QF. Sub-rule (4E) also requires the exchange to furnish particulars of amounts paid or credited on which no tax was deducted in accordance with the guidelines.
• CBDT Circular 14/2022 CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I bought crypto directly from the seller, no exchange — do I deduct? And what if I paid in crypto rather than cash?
  You deduct. In a peer-to-peer transfer the buyer is the person paying the consideration and must deduct under s.194S. Where the consideration is in kind, or is itself another virtual digital asset, the payer must ensure the tax has actually been paid before releasing the consideration — and on a swap each party is both buyer and seller, so each deducts on the transfer it makes.
• CBDT Circular 13/2022 CBDT Circulars & InstructionsCuts both ways
  I trade crypto on an exchange. Who deducts the 1% under s.194S, on what amount, and what changes if a broker is in the chain?
  The exchange. Where a transfer takes place on or through an exchange that is not itself the owner, only the exchange crediting or paying the seller deducts. Where a broker is in the chain, the obligation moves to the broker only if there is a written agreement between the exchange and the broker allocating it. Where the exchange itself owns the asset, the buyer may by written agreement leave the deduction and payment to the exchange.
• Notification 67/2022 — the 194S forms CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  I deducted 1% under s.194S on a peer-to-peer purchase. Which challan and which certificate, and by when?
  Form 26QE and Form 16E, on a thirty-day clock. A specified person deducting under s.194S pays the tax within thirty days from the end of the month of deduction, accompanied by a challan-cum-statement in Form 26QE filed electronically within the same thirty days, and issues the certificate in Form 16E to the payee within fifteen days of that due date. Form 26Q was substituted at the same time to carry ss.194R and 194S for deductors who are not specified persons.
• Statutory position — section 2(47A): what is a virtual digital asset, and what the Government can take out of it CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  The notice says my client dealt in a 'virtual digital asset'. What actually falls inside that definition, and are vouchers, reward points and NFTs inside it?
  Section 2(47A), inserted by the Finance Act 2022 with effect from 1 April 2022, defined a virtual digital asset in three limbs for AY 2023-24 to AY 2025-26 — a fourth sub-clause (d) has since been added, which this entry does NOT set out because it could not be read (see the editor note) — (a) any information, code, number or token, not being Indian or foreign currency, generated through cryptographic means or otherwise, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or a unit of account, and capable of being transferred, stored or traded electronically; (b) a non-fungible token or any other token of similar nature; and (c) any other digital asset the Central Government notifies. A proviso lets the Central Government notify EXCLUSIONS from the definition, subject to conditions, and the Explanation makes 'non-fungible token' itself mean only such digital asset as the Government notifies, and imports the FEMA meanings of 'currency', 'foreign currency' and 'Indian currency'.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.