Blog

The Central Board of Direct Taxes (CBDT) has exempted gift cards, vouchers, mileage points, and reward points from the purview of virtual digital assets (VDAs). The clarification has come on the backdrop of 1% TDS rules for VDAs transaction becoming effective from today (July 1, 2022). 

According to the notification, gift cards and vouchers that may be used to obtain goods or services on a discount will not be counted as VDAs.

Further, mileage points, reward points or loyalty card, under an award, and reward, benefit, loyalty, incentive, rebate or promotional programme that may be used or redeemed to obtain goods or services or a discount on goods or services, will also be exempted from the definition of VDAs.

Besides, subscription to website or platform or application will also be exempted, the notification added. 

Earlier this year, the government first proposed a 1% TDS for VDAs including cryptocurrencies, and non-fungible tokens (NFTs) during the Union Budget session in February, along with a 30% tax on income from VDAs. 

The tax has been introduced through a new section 194S in the Income-tax Act, 1961, the income tax department said in a circular issued last week.

“According to section 194S of the Act, any person who is responsible for paying to any resident any sum by way of consideration for transfer of VDA is required to deduct tax,” the circular stated.

The notification also clarified that tax deduction under 194Q of the Act would not be required once the same is deducted under section 194S of the Act, while section 194Q is applicable for individuals whose business turnover, through the purchase of goods, exceeds INR 10 Cr per annum.

It must be noted that the 30% tax rule for income on VDA transactions became effective on April 1, 2022. The trading volume of cryptocurrency exchanges in India saw a significant decline, up to 60%-70%, after the rule came into effect.