Come July 01, 2022, and the new Income Tax Rules proposed by the Union Budget 2022 are already in place. The new rules involve late fees for linking your PAN and Aadhaar Cards apart from new tax implications on those earning from the sales of cryptocurrencies and influencer marketing.
Taxes on cryptocurrencies
Investments in cryptocurrencies have always been a bone of contention in India, more so as their prices oscillated vigorously between extreme highs and tumultuous lows. The dispute arising from the income on their sales seems to be now settled with the government imposing Tax Deducted at Source (TDS) of one per cent on payments toward virtual digital assets or cryptocurrencies beyond ₹10,000 this year starting today. The Finance Act 2022 had ushered in Section 194S in the Income Tax Act that imposed Tax Deducted at Source (TDS) of one per cent.
The Central Board of Direct Taxes (CBDT) released a statement saying, “The income tax department said both buyer and seller would have to withhold taxes for transactions involving an exchange of one virtual digital asset (VDA) for another. The Central Board of Direct Taxes (CBDT) also said according to section 194S of the I-T Act; the buyer will have to deduct tax in a peer-to-peer transaction of VDA. "Thus, in a peer-to-peer (i.e. buyer to the seller without going through an Exchange) transaction, the buyer (i.e. person paying the consideration) is required to deduct tax under section 194S of the Act.”
The TDS would be applicable to all VDAs including cryptocurrencies, the sale of non-fungible tokens (NFTs), etc. The TDS limit is ₹50,000 for all including individuals and Hindu Undivided Families (HUFs) and must be deducted while paying the seller of that particular asset. The responsibility of deducting the TDS lies with the person, family or organization making payment to the seller, which means that the TDS amount must be deducted from the selling price, post which the rest of the amount must be transferred to the seller’s account.
TDS imposed on doctors, music bands and influencers
The new Income Tax guidelines stipulate a deduction of TDS of 10 per cent by any professional including doctors, music band companies and those providing influencer marketing services. The TDS will be applicable on charges, benefits and perquisites beyond ₹20,000 in that year.
Social media influencers receive gifts or perks from their client companies, which will now be taxed. However, no TDS under the provision of Section 194R would be deducted on the return of the gift by the influencer. The idea behind introducing this new rule stems from how many social media influencers are allowed to retain the products they endorse or review. These gifts include expensive purses, digital watches, jewellery pieces, costly smartphones and more are of substantial value, thus, necessitating TDS imposition.
However, if the client company gifts the social media influencer product(s) that it manufactures, then it must consider the price that it charges from its customers for that product as the value of the benefit. This means that the fair market value of the gift or the perquisite will be considered for TDS calculation.
The inclusion of this provision has included social media influencers into the tax net who will now have to include the value of the benefits they receive as part of their income while filing their income tax returns. This provision also extends to pharmaceutical companies availing free samples of their medicines to doctors.
Penalty for late PAN-Aadhaar linking doubled
The government had mandated the linking of Aadhaar-PAN Cards by June 30, 2022. The CBDT had imposed a fine of ₹500 on those who linked their PAN with Aadhaar between March 31, 2022, and June 30, 2022. However, those who had failed to link both even by June 30, 2022, and are planning to link now will now have to pay a ₹1000 fine.
