Page 18 - Union Budget, 2022

Union Budget, 2022

Liability to deduct tax on transfer of virtual digital assets
• TDS is to be deducted at the newly proposed Sec 194S at 1% of the consideration payable to a resident, if
the aggregate value of such consideration exceeds Rs. 10,000 during the PY. However, tax is not required to

be deducted if the payer is a specified person and the aggregate consideration does not exceed Rs.50,000
during the PY.
• Specified person includes:
- An individual or HUF whose turnover does not exceed Rs.1 crore in case of business, and Rs.50 lakhs
in case of profession during the preceding PY of transfer of virtual digital asset.
- An individual or HUF having any income other than PGBP income (Profits or gains from business or
profession)
• Payer being a specified person is not required to obtain TAN and the provisions of Sec 206AB regarding
deduction of tax at higher rates for payees being specified non-filers of income-tax return shall not be
applicable.
• In any case, where the consideration payable is partly in kind or in exchange of another virtual digital asset,
the payer has to ensure that entire tax on such income has been paid before releasing the consideration.

1 July, 2022
st

• The Section casts responsibility on the person responsible for making payments “to deduct TDS”. It
additionally exempts specified persons from this obligation. The relaxation provided to specified persons of

this obligation may not be practically relevant in the case of cryptocurrencies, since, the crypto exchanges
are responsible for making the payment to the sellers.
• Deduction of TDS for non-residents would be covered u/s 195 read with Sec 115BBH, at 30%.

TDS on benefit or perquisite of a business or profession
• Sec 194R is proposed to be newly inserted to charge TDS at 10% on the aggregate value of benefit or
perquisite provided to a resident if such value exceeds Rs. 20,000 in such FY. In case where the benefit is in
kind or the cash portion is less than the required TDS amount, it has to be ensured that the recipient has

paid the entire tax on such income and not only the TDS being deducted.
• However, individuals and HUF having turnover or gross receipts upto Rs. 1 Crore or 50 lakhs from business
or profession respectively in the preceding FY need not deduct TDS under this provision.
1 July 2022 onwards
st

• The proposed amendment attempts to bring into tax net, assessees who were not disclosing the benefit or
perquisite arising from business or profession in the return of income but which is taxable u/s 28(iv).

However, “benefit” or “perquisite” has not been defined and the same has been subject matter of litigations
in various cases.
• The scope of benefits that would be covered under the said Section is ambiguous because it was ruled by
the Apex Court in Mahindra and Mahindra Ltd. [2018] 93 taxmann.com 32 (SC), that for invoking provisions
of Sec 28(iv), benefit has to be in a form other than in shape of money; however, Sec 194R itself distinguishes
between TDS liability with respect to benefit in cash and kind.
• With inferences from judicial precedents and the intent of Sec 28(iv), discounts seem to be outside the scope
of the aforesaid Section; however, benefits such as providing gifts, articles, free vouchers, etc. would squarely
come under this ambit.

Insights from NES

The Monetary Policy Committee (MPC) maintained status quo on the policy repo rate during May 2020 to

February 2022 across 10 MPC bi-monthly meetings, after a substantial cut of 115 basis points (bps) during
February-May 2020 and a cumulative 250 basis points cut since February 2019.

16