## Policy Analysis Report: Income-tax Rules, 1962 - Amendment Related to Virtual Digital Assets
**1. Executive Summary:**
This report analyzes a recent amendment to the Income-tax Rules, 1962, specifically concerning the taxation of virtual digital assets (VDAs) under Section 194S of the Income-tax Act, 1961. The amendment introduces new reporting requirements for exchanges that facilitate VDA transfers, particularly those that have agreed to pay tax on behalf of buyers. This amendment aims to streamline tax collection and reporting related to VDA transactions and enhance transparency. The key finding is the introduction of Form No. 26QF for quarterly reporting by exchanges.
**2. Introduction:**
The purpose of this report is to provide an informative analysis of the amendment to the Income-tax Rules, 1962, as detailed in the provided government notification. This analysis focuses on understanding the changes related to the taxation and reporting of transactions involving virtual digital assets, based solely on the information contained within the provided text.
**3. Policy Overview:**
* **Original Policy:** Income-tax Rules, 1962.
* **Core Objective(s):** Based on the provided text, the core objective of this amendment is to implement and clarify the reporting requirements related to the taxation of virtual digital assets under Section 194S of the Income-tax Act, 1961. It aims to define the obligations of exchanges involved in VDA transfers and to establish a structured reporting framework.
**4. Background and Rationale:**
* **Amendment Rationale:** The amendment appears designed to address the practical implementation challenges of Section 194S, specifically regarding the deduction and payment of tax on VDA transfers. The amendment provides a mechanism for exchanges to handle tax obligations, potentially simplifying the process for individual buyers and sellers. The introduction of quarterly reporting via Form 26QF suggests a need for more frequent and structured oversight of VDA transactions.
**5. Key Provisions / Changes:**
This amendment specifically modifies Rule 31A of the Income-tax Rules, 1962, by:
* **Change to Rule 31A:** Insertion of a provision after sub-rule (1) requiring exchanges that have agreed to pay tax on VDA transfers (as per Section 194S(6) guidelines) to deliver a quarterly statement of such transactions in Form No. 26QF to the Principal Director General of Income-tax Systems or Director General of Income-tax Systems or an authorized person.
* **New Rule:** Mandates quarterly reporting of VDA transactions by exchanges. This includes transactions where the exchange has agreed to pay the tax that would otherwise be deducted by the buyer. It specifies the form to be used (Form No. 26QF) and the recipient of the report.
* **Effect of Change:** This change shifts some of the tax burden for VDA transactions from the individual buyer to the exchange, under certain conditions. It also centralizes reporting through the exchanges, potentially improving compliance and ease of administration for the tax authorities.
* **Definition of "Exchange" and "Virtual Digital Asset":** Provides explicit definitions of "Exchange" and clarifies that virtual digital asset shall have same meaning as assigned to it in clause 47A of section 2.
* **Change to Rule 31A:** Insertion of sub-rule 4E requiring the exchange referred to sub-rule 1 shall, at the time of preparing of quarterly statement in Form No. 26QF, furnish particulars of account paid or credited on which tax was not deducted in accordance with guidelines issued under subsection 6 of section 194S.
* **Introduction of Form No. 26QF:** Inserts a new form, Form No. 26QF, in Appendix II of the Income-tax Rules, 1962. This form is the designated template for quarterly reporting by exchanges and requires detailed information about VDA transactions, including the names, addresses, and PANs of buyers/brokers, transaction dates, VDA values, and tax paid. It requires a signed verification from a responsible person at the exchange.
**6. Target Audience and Stakeholders:**
The primary target audience and stakeholders directly affected by this amendment are:
* **Virtual Digital Asset Exchanges:** These entities are now responsible for quarterly reporting of VDA transactions and potentially for paying tax on behalf of buyers.
* **Buyers and Sellers of Virtual Digital Assets:** While the direct tax liability may shift to the exchange in some cases, these individuals are still impacted as their transactions will be tracked and reported through the exchanges.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The Central Board of Direct Taxes (CBDT) is the issuing authority for this notification. The Principal Director General of Income-tax Systems or Director General of Income-tax Systems (or their authorized personnel) are designated as the recipients of Form No. 26QF.
* **Timelines/Procedures:** The amendment comes into force from July 1, 2022. Exchanges are required to furnish Form No. 26QF on a quarterly basis, with reporting periods ending in June, September, December, and March. The form specifies the information required, including details of transactions where tax was deducted and where it was not deducted under section 194S(6).
**8. Expected Outcomes / Impact of Changes:**
The likely intended outcomes of these changes are:
* **Increased Tax Compliance:** Centralized reporting through exchanges is expected to improve compliance with Section 194S and reduce tax evasion in VDA transactions.
* **Simplified Tax Collection:** Allowing exchanges to pay tax on behalf of buyers may streamline the tax collection process and reduce the administrative burden on both taxpayers and the tax authorities.
* **Enhanced Transparency:** The detailed information required in Form No. 26QF will provide greater transparency into the VDA market and facilitate tax oversight.
**9. Conclusion:**
This amendment to the Income-tax Rules, 1962, represents a significant step towards regulating the taxation of virtual digital assets in India. By introducing quarterly reporting requirements for exchanges and clarifying their role in tax collection, the amendment aims to enhance tax compliance, simplify tax administration, and improve transparency in the VDA market. The introduction of Form No. 26QF is crucial for the implementation of these changes, mandating a structured reporting mechanism for exchanges to comply with the new regulations.
Key Entities Referenced
NEW DELHI: The city where the notification was issued.
Incometax Act, 1961: The primary act being amended by this notification.
Central Board of Direct Taxes: The organization issuing the notification.
Incometax Rules, 1962: The rules being amended by this notification.
Incometax 20th Amendment Rules, 2022: The name of the amendment rules.
Principal Director General of Incometax Systems: An authority mentioned in the context of delivering statements.
Director General of Incometax Systems: An authority mentioned in the context of delivering statements.
Form No. 26QF: The form for quarterly statement of tax deposited in relation to transfer of virtual digital asset.
virtual digital asset: A type of asset whose transfer is subject to tax rules detailed in the notification.
Ministry of Finance: The ministry under which the Department of Revenue operates.
Department of Revenue: The department under which the Central Board of Direct Taxes operates.
section 194S: Section of the Incometax Act, 1961 related to tax deduction on transfer of virtual digital assets.
Appendix II: Appendix II of Incometax Rules, 1962, where the form is being inserted
ANKIT JAIN: Under Secretary who signed the notification
Mayapuri, New Delhi: Location of the Government of India Press
Delhi: Location of the Controller of Publications
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99
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असाधारण
EXTRAORDINARY
भाग II—खण् ड 3—उप-खण्ड (i)
PART II—Section 3—Sub-section (i)
प्राजधकार स ेप्रकाजित
PUBLISHED BY AUTHORITY
स.ं 461] नई दिल्ली, ोृैस्ट्प जतिार, िनू 30, 2022/ आषाढ़ 9, 1944
No. 461] NEW DELHI, THURSDAY, JUNE 30, 2022/ASHADHA 9, 1944
जित्त मत्रं लाय
(रािस्ट्ि जिभाग
(केन्द रीय प्रयय क्ष कर ोरडड)
अजधसचू ना
नई दिल्ली, 30 िून, 2022
आय-कर
सा.का.जन. 482(अ .—केन्द रीय प्रय यक्ष कर ोरड,ड आय-कर अजधजनयम, 1961 (1961 का 43 की धारा 294ध के
साथ पठित धारा 295 द्वारा प्रिय त िजतत यक का प्रयरग करते ए ए आय-कर जनयम, 1962 का और संिरधन करन े के जलए
जनम्न जलजखत जनयम ोनाता ै, अथाडत:्-
1. संजक्ष प् त नाम और प्रारंभ.-(1 इन जनयमक का संजक्ष प् त नाम आय-कर (ोीसिां संिरधन जनयम, 2022 ै ैं।
(2 य े1 िलु ाई, 2022 स ेप्रियृ त ैकगे ।
2. आय-कर जनयम, 1962 (जिसे इसमें इसके पश् चात् मलू जनयम कैा गया ै के जनयम 31क में,--
(i) उपजनयम (1 के पश् चात ् जनम् नजलजखत अतं :स्ट् थाजपत दकया िाएगा, अथाडत:्-
“परन्दत ु िैां केन्द र, धारा 194ध की उपधारा (6 के अधीन िारी मागडििडक जसद्धान्द तक के अनुसार धारा 194ध के अधीन
ऐसी आजस्ट् त के रेतेता द्वारा कतीती दकए िाने के जलए अपेजक्ष त कर के जिकल् प के ूपप में अपने द्वारा स्ट् िाजधकृत आभासी
जडजितल आजस्ट् त के अंतरण के सं यिैार के संोंध म ें कर संिय त करने के जलए सैमत ै, केन्द र मुयय आय-कर मैाजनिेिक
(प्रणाली या आय-कर मैाजनिेिक (प्रणाली अथिा मयु य आय-कर मैाजनिेिक (प्रणाली या आय-कर मैाजनिेिक
(प्रणाली द्वारा प्राजधकृत यजतत कर प्रूपप संय या 26थच म ें ऐसे सं यिैार का त्र माजसक जििरण प्रिान करेगा या प्रिान
कराएगा ।
4358 GI/2022 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
स्ट् पष्त ीकरण: इन उपजनयम के प्रयरिनक के जलए,--
(i) “केन्द र” से ऐसा यजतत अजभप्रेत ै िर आभासी जडजितल आजस्ट् त का अतं रण करने के जलए उपयरिन करता ै या
मंच संचाजलत करता ै, िर रेतय और जिरेतय यापार के सििृ ै और उसका उनके उपयरिन या मंच पर जनष्प ािन
करता ै ।
(ii) “आभासी जडजितल आजस्ट् त” का िैी अथ डैरगा, िर उसका धारा 2 के खंड (47क म ेंै ।”
(ii) उपजनयम (4घ के पश् चात ्जनम्न जलजखत उपजनयम अंत:स्ट्थ ाजपत दकया िाएगा, अथाडत्:-
“(4ङ उपजनयम (1 में जनर्िष्ड त केन्द र, प्रूपप संय या 26थच में त्र माजसक जििरण त यार करते समय संिय त या िमा खात े
जिस पर धारा 194ध की उपधारा(6 के अधीन िारी मागडििडक जसद्धांतक के अनुसार कर की कतीती नैीं की गई थी, की
जिजिजष्त यां प्रस्ट् तुत करेगा ।”
3. मलू जनयमक के पठरजिष्त 2 में प्रूपप संय या 26थङ के पश् चात जनम्न जलजखत प्रूपप अंत:स्ट्थ ाजपत दकया िाएगा, अथाडत ् :-
“प्रूपप सयं य ा 26थङ
.............. िून/जसतंोर/दिसंोर/माचड कर समाप् त ैरन े िाल ेत्रमास के जलए केन्दर द्वारा प्रस्ट्त ुत दकया िाने िाला धारा 194ध
के अधीन आभासी जडजितल आजस्ट् त के अंतरण के संोंध म ेंजनक्ष जे पत कर का त्र माजसक जििरण
[धारा 194ध, जनयम 31क(1 और (4ङ ]
1. केन्द र का नाम :
2. केन्द र का पता :
3. पेन :
4. जिय तीय िषड :
5. सं यिैारक के ् यीरे :
(क जनयम 31क के उपजनयम (1 के परन्दत ुक म ेंजनर्िष्ड त सं यिैारक के संोंध म ें संिय त कर के ् यीरे :-
रेत.सं. रेतेता रेतेता रेतेता सं यिैार रेतेता/िलाल रेतेता/िलाल कुल कुल ........(संिाय चालान के ् यीरे
/िलाल /िलाल का /िलाल की तारीख द्वारा रेतय द्वारा रेतय प्रजतफल प्रजतफल की तारीख
का नाम पता का पेन दकए गए दकए गए का 1% कर दकए गए
िीडीए का िीडीए की कर संिाय में
मूल् य संय या प्रजतबोंजोत
1. ोैंक की संिय त चालान
िाखा का रकम की
ोीएसआर रेत.सं.
करड
2.
3.
(ख सं यिैार के ् यीरे जिस पर धारा 194ध की उपधारा (6 के अधीन िारी मागडििडक जसद्धान्द तक के अनुसार कर की कतीती
नैीं की गई थी ।
रेत.सं. िलाल का िलाल का िलाल का िलाल का सं यिैार िलाल द्वारा िलाल द्वारा रेतय कुल संिय त/िमा
नाम पता पेन तेन की तारीख रेतय दकए गए दकए गए िीडीए प्रजतफल
िीडीए का की संय या
मूल् य
1.
2.
3.[भाग II—खण् ड 3(i)] भारत का रािपत्र : असाधारण 3
सयय ापन
मैं ..... की क्ष मता में तारीख........... कर यै सय याजपत करता ं ंकी उपररतत िी गई सूचना सैी और पणू ड ै ।
स्ट् थान.............. यजतत के ैस्ट् ताक्ष र
तारीख................ नाम और पिाजभधान ।”
[अजधसूचना सं. 73/2022/फा. सं. 370142/29/2022-तीपीएल(भाग-1 ]
अंदकत ि न, अिर सजचि
ठतप्प ण : मूल जनयम भारत के रािपत्र, असाधारण, भाग-II, खण्ड-3, उपखण्ड (ii) में अजधसूचना संय याक का.आ.
969(अ , तारीख 26 माचड, 1962 द्वारा प्रकाजित दकए गए थ े और अजधसूचना संय याक सा.का.जन. 463(अ)
तारीख 21.06.2022 द्वारा अंजतम संिरधन दकया गया ै ।
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 30th June, 2022
INCOME-TAX
G.S.R. 482(E).—In exercise of the powers conferred by section 295 read with section 194S of the
Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby, makes the following rules
further to amend the Income-tax Rules, 1962, namely:-
1. Short title and commencement.–– (1) These rules may be called the Income-tax (20th Amendment)
Rules, 2022.
(2) They shall come into force from 1st day of July, 2022.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 31A, ––
(i) after sub-rule (1), the following shall be inserted, namely:-
“Provided that where the exchange has, in accordance with the guidelines issued under sub-section (6) of
section 194S, agreed to pay tax in relation to a transaction of transfer of a virtual digital asset, owned by it
as an alternative to tax required to be deducted by the buyer of such asset under section 194S, the
Exchange shall deliver or cause to be delivered, a quarterly statement of such transactions in Form No.
26QF to the Principal Director General of Income-tax (Systems) or Director General of Income-tax
(Systems) or the person authorised by the Principal Director General of Income-tax (Systems) or the
Director General of Income-tax (Systems).
Explanation: For the purposes of this sub-rule,––
(i) “Exchange” means a person that operates an application or platform for transferring of virtual
digital assets, which matches buy and sell trades and execute the same on their application or
platform;
(ii) “virtual digital asset” shall have same meaning as assigned to it in clause (47A) of section 2.”
(ii) after sub-rule (4D), the following sub-rule shall be inserted, namely,––
“(4E) The exchange referred to sub-rule (1) shall, at the time of preparing of quarterly statement in Form
No. 26QF, furnish particulars of account paid or credited on which tax was not deducted in accordance
with guidelines issued under sub-section (6) of section 194S.”.4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
3. In the principal rules, in Appendix II, after Form No. 26QE, the following Form shall be inserted,
namely:–
“Form No. 26QF
Quarterly statement of tax deposited in relation to transfer of virtual digital asset under
section 194S to be furnished by an exchange for the quarter ending ………. June/
September/ December/ March
[section 194S, rule 31A(1) and (4E)]
1. Name of the Exchange :
2. Address of the Exchange :
3. PAN :
4. Financial year :
5. Details of transactions :
(A) Details of tax pain with respect of transactions referred to in proviso to sub-rule (1) of
rule 31A:
S. Name of Address PAN of Date of Value of No. of Total 1% of total Reflected Challan details
No. buyer/broker of buyer/broker transaction VDA bought VDA consideration consideration in tax
BSR Amount Challan
buyer/ by bought payment
code paid (in serial
broker buyer/broker by made on
of Rs.) number
buyer/ (date of
bank
broker tax
branch
payment )
1.
2.
3.
(B) Details of transactions on which tax was not deducted in accordance with the guidelines
issues under sub-section (6) of section 194S
S. Name of Address of PAN of TAN of Date of Value of VDA No. of VDA Total consideration
No. broker broker broker broker transaction bought by bought by paid/ credited
buyer buyer
1.
2.
3.
Verification
I ……………………, in my capacity as ………………………… of ………………………… do
hereby certify that the information produced above is correct and complete.
Place: ............................... Signature of the person
Date: .............................. Name and designation.”.
[Notification No. 73/2022/F. No. 370142/29/2022-TPL (Part-I)]
ANKIT JAIN, Under Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-
section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and was last
amended vide notification number G.S.R. 463(E) dated 21.06.2022.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.