The Central Board of Direct Taxes (CBDT) has released a circular clarifying which digital assets qualify for the label "Virtual Digital Asset" and how they will be taxed in the future.
Late Thursday, the CBDT issued a statement wherein the tax authority said that gift cards, vouchers, mileage points, reward points, and loyalty cards would be excluded from the purview of virtual digital assets (or VDAs).
This will ensure that these goods are not subject to the tax imposed in this budget for VDAs, which includes cryptocurrencies and non-fungible tokens (NFTs).
CBDT stated that the exemption will include gift cards or vouchers that can be redeemed for goods or services or a discount on goods, mileage points, reward points, or loyalty cards under an award, as well as reward, benefit, loyalty, incentive, rebate, or promotional programmes that can be redeemed for goods or services or a discount on goods.
The exemption will also include subscription to a website, platform, or application, according to the notice that was released on Thursday.
This clarification from CBDT has arrived a day before the provision of 1 per cent tax deducted at source (TDS) on all VDA transactions comes into effect.
During the recent union Budget, the centre proposed new tax laws on VDAs which came into effect from April 1 this year. The centre implemented a new tax policy relevant to cryptocurrencies. Income from transactions involving crypto assets is now subject to a 30 per cent tax, and 1 per cent TDS on transactions in these asset classes that exceed a specified level.
Concerns were raised by the crypto community regarding the expansive definition of VDAs after the announcement in the budget.
Form 26QF, which is required to be filed by all virtual digital asset exchanges under Section 194S, has also been notified by the CBDT.
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