Section 194S-TDS on the payment of any crypto or other virtual asset

Form 26QE is a document for reporting TDS on Virtual Digital Assets (like Cryptocurrency) transactions under Section 194-S. 

It covers TDS on Virtual Digital Assets, its applicability, limits, rates, time of deduction, and the process of filing TDS under Section 194-S.

Background: TDS on VDA Transfer

The Budget 2022 introduced tax deduction at source (TDS) on virtual digital assets (VDA) provisions. This was enabled through an amendment in the Income Tax Act of 1961, adding a new section 194S for TDS on VDA transfer.

What is Section 194S?

2.1 Applicability: This applies to anyone who pays a resident seller of VDA. Section 194S is effective from 01st July 2022

NOTE: This section does not apply if the VDA seller is non-resident. Section 195 covers non-resident payments. 

2.2 Threshold Limit 

1. Individual/HUF with total sales or turnover under Rs 1 crore for business or Rs 50 lakhs for profession in the preceding financial year: TDS deduction if payment is over Rs 50,000
2. Exchanges/any other person : TDS deduction if payment is over Rs 10,000.

2.3 TDS Rate :1% on the payable or paid consideration.

2.4 Time of Deduction: TDS should be deducted at the earliest of these times: 

1. When the amount is credited to the account of a resident Seller of VDA, or
2. When the amount is paid to a resident Seller of VDA.

2.5 Requirement of TAN: TAN isn't needed for TDS deduction under section 194S. 

2.6 TDS Return 

1. Individuals/HUFs whose total sales or turnover doesn't exceed Rs 1 crore (for business) or Rs 50 lakhs (for profession) must deposit the TDS deducted under section 194S to the Government using Form 26QE.
2. Entities other than individuals/HUFs (like exchanges or other persons) must deposit the TDS deducted under section 194S to the Government using Challan 281 and file Form 26Q returns quarterly. Note: TDS returns and payments are separate.

Form 26QE Explanation and Filing Process

3.1 Form 26QE is a document for reporting TDS transactions on Virtual Digital Assets (VDA) purchases u/s 194S. 

3.2 Due Date: File Form 26QE within 30 days from the end of the month when the tax deduction occurred. 

NOTE: For example, if Mr. Arjun bought VDA from Mr. Karna for Rs 60,000 on March 15, 2023, he needs to deduct TDS @ 1% on that date and file Form 26QE by April 30, 2023.

3.3 File Form 26QE athttps://www.incometax.gov.in/iec/foportal/

3.4 Form 26QE Filing Requirements 

1. Buyer's PAN and Name
2. Seller's PAN and Name
3. Buyer and Seller's Address
4. Buyer and Seller's Contact Info
5. Total VDA Consideration Value
6. VDA Transfer Date
7. VDA Consideration Payment and TDS Deduction Dates
8. Payment Method
9. Bank Payment Details