CBDT Clarifies The Scope Of VDAs: Loyalty Points, NFTs Etc.

The Finance Act, 2022 amended the Income-tax Act, 1961 (IT Act) by introducing a new taxation regime in relation to Virtual Digital Assets (VDAs) wherein: (i) a 30% tax has been levied on income from transfer of VDAs in the hands of the transferor; (ii) receipt of VDAs for nil or inadequate consideration has been made taxable in the hands of the recipient; and (iii) an obligation has been imposed (under Section 194S of the IT Act) on the persons responsible for paying any consideration to 'Indian residents' for transfer of VDAs to deduct tax at source (TDS) at 1% (with effect from 1 July 2022). Our Ergo on budget 2022 proposals can be accessed here.

VDA has been defined to mean: (i) any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or