Tax regulations in India impose certain responsibilities on individuals and entities involved in the transfer of virtual digital assets. Section 194S outlines the obligations related to tax deduction at source for such transactions. This provision applies to both residents and non-residents who are responsible for making payments in consideration for the transfer of virtual digital assets.
Filing Requirements with Form 26QE
When the entity responsible for tax deduction under Section 194S is classified as a specified person, filing requirements are specified under Form 26QE. The specified person must electronically submit a statement-cum-challan using Form 26QE within 30 days from the end of the month in which the tax has been deducted. Notably, the specified person, whether an individual or a Hindu Undivided Family (HUF), is not obligated to obtain and provide a Tax Deduction and Collection Account Number (TAN). Instead, the specified person can furnish Form 26QE by quoting their Permanent Account Number (PAN).
On the other hand, if the deductor does not fall under the category of a specified person, they must use Form 26Q to provide details of tax deduction.
Specified Person Criteria
Specified persons, as defined for the purpose of this provision, include the following categories:
a) Individual or HUF: Whose total sales, gross receipts, or turnover did not exceed Rs. 1 crore for business or Rs. 50 lakhs for a profession in the financial year immediately preceding the one in which the virtual digital asset is transferred.
b) Individual or HUF: Having no income under the head “profits and gains of business or profession.”
Due Date for Form 26QE
The due date for filing the TDS return using Form 26QE is crucial for compliance. It is necessary to issue this form for tax deducted under Section 194S (by specified persons) and submit it within 30 days from the end of the month in which the tax has been deducted.
Consequences of Failure to Furnish TDS Return
Failing to submit the TDS statement on or before the due date carries financial implications. As per Section 234E, a late filing fee of Rs. 200 per day of default is imposed. However, the total fee cannot exceed the deductible amount. If the deductor does not proactively pay the late filing fees, the amount will be calculated at the time of processing the TDS statement.
Apart from the late filing fees under Section 234E, there is an additional penalty provision under Section 271H for those who fail to file the TDS statement or miss the due dates. This penalty is levied as per the discretion of the tax authorities.
It is crucial for entities and individuals involved in virtual digital asset transactions to adhere to these provisions and timelines to avoid financial penalties and ensure regulatory compliance. Understanding the specified person criteria and the distinction in filing requirements helps entities determine their obligations accurately. Moreover, timely and accurate submission of Form 26QE is essential to steer clear of the consequences associated with non-compliance.
Non-applicability
Irrespective of the provisions in sub-section (1), tax deduction is not required in the following cases:
(a) The payment is made by a specified person, and the total value or aggregate value of such payment does not surpass fifty thousand rupees in the financial year.
(b) The payment is made by any person other than a specified person, and the total value or aggregate value of such payment does not exceed ten thousand rupees in the financial year.
