Taxation of Virtual Digital Assets – Section 115BBH - Income Tax - Ready Reckoner - Income Tax

Taxation of Virtual Digital Assets Section 115BBH Tax on Virtual Digital Assets [ Section 115BBH inserted AY 2023-24]- As per Section 115BBH @30% on Income on transfer of Virtual Digital Asset Tax payable on income from the transfer of any VDA - Where the total income of an assessee includes any income from the transfer of any virtual digital asset, notwithstanding anything contained in any other provision of this Act, the income-tax payable shall be the aggregate of,- the amount of income-tax calculated on the income from transfer of such virtual digital asset @30%.; and the amount of income-tax with which the assessee would have been chargeable, had the total income of the assessee been reduced by the income referred to in clause (a). Notwithstanding anything contained in any other provision of this Act,- No deduction allowed except cost of acquisition - no deduction in respect of any expenditure (other than cost of acquisition, if any) or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the income referred to in clause (a) section 115BBH(1) ; Set off or carry forward of loss from transfer of virtual digital assets not to be allowed - No set off of loss from transfer of the virtual digital asset computed under clause (a) of section 115BBH(1) shall be allowed against income computed under any provision of this Act to the assessee and such loss shall not be allowed to be carried forward to succeeding assessment years. The word transfer as defined in clause (47) of section 2, shall apply to any virtual digital asset, whether capital asset or not. Notes:- NFT shall not include a NFT whose transfer results in transfer of ownership of underlying tangible assets and the transfer of ownership of such underlying tangible asset is legally enforceable. The following virtual digital assets w hich shall be excluded from the definition of virtual digital asset :- Gift Card or vouchers , being a record that may be used to obtain goods or services or a discount on goods or services; Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services; Subscription to websites or platforms or application. [ Notification No. 74/2022 dated 30.06.2022 ] Taxability of receipt of virtual digital assets as gift or for inadequate consideration [ Section 56(2)(x) ] where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,- any property, other than immovable property,- (a) without consideration - the aggregate fair market value of which exceeds Rs. 50,000/-, the whole of the aggregate fair market value of such property; (b) For inadequate consideration - for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50,000/-, the aggregate fair market value of such property as exceeds such consideration. [ Section 56(2)(x)(c) ] Explanation .-For the purposes of this clause,- (b) the expression property shall have the same meaning as assigned to it in clause (d) of the Explanation to clause (vii) and shall include virtual digital asset. Tax deduction at source TDS Under section 194S @1% TDS to be deducted of any sum by way of consideration for transfer of a Virtual Digital Asset . [ For more details refer this Link ] Obligation to furnish information on transaction of crypto-asset [ Section 285BAA W.e.f. 01.04.2025 Inserted vide Section 90 of the Finance Act, 2025 ] Reporting Obligation [ Section 285BAA(1) ] Any person, being a reporting entity, as prescribed, in respect of a crypto-asset , shall furnish information in respect of a transaction of such crypto-asset in a statement, for such period, within such time, in such form and manner and to such income-tax authority, as prescribed. Rectification of Defective Statements [ Section 285BAA(2) ] Identification of Defects - Where the prescribed income-tax authority considers that the statement furnished under sub-section (1) is defective, he may intimate the defect to the person who has furnished such statement. Opportunity to Rectify - Authority give him an opportunity of rectifying the defect within thirty days from the date of such intimation or such further period as may be allowed. Deeming Provision - if the defect is not rectified within such period, the provisions of this Act shall apply as if such person had furnished inaccurate information in the statement. Non-Furnishing of Statement [ Section 285BAA(3) ] Notice to Defaulting Entity: Where a person who is required to furnish a statement under sub-section (1) has not furnished the same within the specified time. The income-tax authority may serve a notice requiring compliance within a period not exceeding thirty days from the date of service. Mandatory Compliance: The recipient is statutorily bound to furnish the statement within the time specified in the notice. Correction of Inaccuracies [ Section 285BAA(4) ] If any person, having furnished a statement under sub-section (1), or in pursuance of a notice issued under sub-section (3), comes to know or discovers any inaccuracy in the information provided in the statement, he shall within ten days inform the prescribed income-tax authority, the inaccuracy in such statement and furnish the correct information in such manner as prescribed. Rule-making Powers [ Section 285BAA(5) ] The Central Government may, by rules prescribe (a) Registration - the persons referred to in sub-section (1) to be registered with the prescribed income-tax authority; (b) Information Maintenance - the nature of information and the manner in which such information shall be maintained by the persons referred to in clause (a); and (c) Due Diligence - the due diligence to be carried out by the persons referred to in sub-section (1) for the purpose of identification of any crypto-asset user or owner. likely mirroring anti-money laundering (AML) and know-your-customer (KYC) standards.