The Finance Act, 2022 (FA 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.
With respect to implementation of 1% TDS obligation in relation
to VDA transactions undertaken on Exchanges, there were certain
practical concerns and difficulties as in such transactions,
details such as identity / PAN of the seller are generally not
known to the buyer. Further, in case of barter of one VDA
