Gift Cards, Vouchers, Loyalty Points don’t fall under VDAs: CBDT

Gift cards, vouchers, and loyalty points have been exempted from the classification of virtual digital assets  (VDAs) by the Central Board of Direct Taxes (CBDT). The clarification follows the implementation of 1 percent TDS rules for VDA purchases beginning today (July 1, 2022).

Gift cards and vouchers that can be used to get discounted goods or services will not be recognized as VDAs, according to the notification. Furthermore, reward points, loyalty cards, or mileage points, received through an award, benefit, loyalty, incentive, rebate, or promotional program and utilized or redeemed to get goods or services or a discount on goods or services will be exempt from the category of VDAs.

Moreover, according to the notification, subscriptions to websites, services, or applications would be exempted. Earlier this year, during the Union Budget session in February, the government proposed a 1 percent TDS on VDAs, including cryptocurrencies and non-fungible tokens (NFTs), and a 30 percent tax on VDA gains. 

The tax was implemented through a new section 194S of the Income-tax Act of 1961, according to a circular released by the income tax department last week. Which said, “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 notification further highlighted that tax deduction under section 194Q of the Act is not necessary if the same is deducted under section 194S of the Act, however, section 194Q is applicable for those whose business turnover, through the acquisition of products, exceeds Rs 10 crores each year.

It should be mentioned that the 30 percent taxation for income from VDA transactions went into effect on April 1, 2022. Following the implementation of the legislation, the trading volume of bitcoin exchanges in India fell by up to 60 percent - 70 percent.