Applicability of withholding tax at the rate of 1% under Section 194S
Categories: Bitcoin
Assessees are required to pay income tax on their total income for the previous year, as per the Income Tax Act, 1961 (ITA). Due to the fact that most returns are generally filed at the end of the financial year, it may be difficult for assesses like you to pay the full amount by the due date. Tax deduction at source is provided by the Central Board of Direct Taxes (CBDT) on various occasions in order to ease the burden of assessees. A deduction means that the tax due on an income is deducted on your behalf by the payer, prior to the income being credited or paid to you. In this case, the payer will be referred to as a “deductor,” while you will be referred to as a “deductee”. The assessee will then no longer be concerned about paying taxes at the end of the year, as the deductor would be paying them on your behalf. Further, it will lead to greater compliance among the general public, making tax refunds more readily accessible at the time of the filing of tax returns.
The Budget 2022 also proposed to impose withholding tax on transfer of virtual digital assets under Section 194S of the IT Act. Accordingly, with effect from July 1, 2022, any person responsible for paying to a resident any sum by way of consideration for transfer of a virtual digital asset i.e. Bitcoin, will deduct tax at source of 1% at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier.