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TMI BlogGuidelines for removal of difficulties under sub-section (6) of section 194S of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. These guidelines are required to be lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax deduction under section 194S of the Act. 2. In a case where the credit/payment between Exchange and the seller is through a broker (and the broker is not seller), the responsibility to deduct tax under section 194S of the Act shall be on both the Exchange and the broker. However, if there is a written agreement between the Exchange and the broker that broker shall be deducting tax on such credit/payment, then broker alone may deduct the tax under section 194S of the Act. The Exchange would be required to furnish a quarterly statement (in Form no 26QF) for all such transactions of the quarter on or before the due date prescribed in the Income-tax Rules, 1962 . (ii) In a case where the transfer of VDA takes place on or through an Exchange and the VDA being transferred is owned by such Exchange : In this case there are no multiple players. The buyer is required to deduct tax under section 194S of the Act. However, there may be a practical issue as the buyer may not know whether the VDA being transferred is owned by the Exchange or not. Hence, there may be genuine doubt in the mind of buyer with regard to its responsibility to deduct tax under section 194S of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d another is buyer for B and seller for A . Thus both need to pay tax with respect to transfer of VDA and show the evidence to other so that VDAs can then be exchanged. This would then be required to be reported in TDS statement along with challan number. This year Form No. 26Q has included provisions for reporting such transactions. For specified persons, Form No. 26QE has been introduced. However, if the transaction is through an Exchange there is practical issue in implementing this provision. In order to address this practical issue and to remove difficulty, it is clarified that in such a situation, as an alternative, tax may be deducted by the Exchange. Such an alternative mechanism can be exercised by the Exchange based on written contractual agreement with the buyers/sellers. If such an alternative mechanism is exercised, (i) the Exchange would be required to deduct tax for both legs of the transactions and pay to the Government. In the Form 26Q it will, for the reasons explained before, need to report it as tax deducted on both legs of the transaction. (ii) the buyer and seller would not be independently required to follow the procedure prescribed in pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the system coding that the conversion into INR happened at the first available buy order based on the prevailing buy order book of the respective Exchange at the time of conversion. As a practice, the respective Exchange liquidating the VDA shall be prohibited to be a buyer for these VDAs. (v) Customer will be issued a contract note over email which will include the amount of tax withheld in kind under section 194S and the amount of INR realized from such tax withheld. (vi) The tax withheld in kind under section 194S of the Act and converted into INR by following the above procedure shall be deposited in the Government Account as per the time line and process given in the Income-tax Rules 1962 . It is clarified that there would not be any further TDS for converting the tax withheld in kind in the form of VDA into INR or from one VDA to another VDA and then into INR. Question 3: Whether the provision of section 194Q of the Act is also applicable on transfer of VDA? Answer Without going into the merit whether VDA is goods or not, it is clarified that once tax is deducted under section 194S of the Act, tax would not be required to be deducted under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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