New tax provision for digital assets

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Tax

The Finance Act 2022 has inserted a new section in the Income-tax Act, 1961, under which a person responsible for paying to any resident for the transfer of a virtual digital assets (VDAs) will be able to deduct 1% of the paid amount from his or her income tax.

According to the new provision, the tax deduction must be made at the time the amount is credited to the account of the resident or at the time of payment, whichever is earlier.

The “person” claiming the deduction could be an individual, a Hindu undivided family (HUF) without income that comes under “profit and gains of business or profession”, or an individual or HUF with business or professional income under INR10 million (USD125,000) (business) or INR5 million (professional).