Guidelines to remove difficulties for deduction of tax at source on transfer of virtual digital asset

Finance Act 2022 inserted a new section 194R in the Income-tax Act, 1961 (hereinafter referred to as “the Act”) with effect from 1st July 2022. The new section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @ 10% of the value or aggregate of value of such benefit or perquisite, before providing such benefit or perquisite. The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1% of such sum as income tax thereon.

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