How do new income tax regulations impact doctors, social media influencers, and cryptocurrency traders?

Last week, the Income Tax authority released rules for the new TDS provision addressing compensation from a trade or profession.

What are TDS?

The TDS concept was established to tax income in its very form. This method requires a person (deductor) who must make a specified payment to another person (deductee) to withhold tax at the source and deposit it into the Central Government's account. The deductee from whose taxes source deductions are entitled to receive credit for the amount deducted based on Form 26AS or a TDS certificate produced by the deductor.

Also Read: Important things to remember about the TDS

The provision of TDS on advantages from startup or sales brand recognition has been included in the Union Budget and will be applied to doctors and social media influencers. Such benefits would be subject to a TDS of 10%. Below are the new rules as stated by Nirmala Sitharaman, the Union Finance Minister, in the Union Budget 2022, which was unveiled on February 1:

Also Read: Union Budget 2022: Key Highlights 

1. Rules affecting crypto traders:

The Government of India (GoI) proposed an additional 1% TDS on digital currencies in the union budget 2022, regardless of the gain or loss experienced by the investor, following the application of a 30% flat tax rate on cryptocurrencies from April 1, 2022. The proposed rule went into effect on July 1. An investor may, however, ask for a refund of TDS imposed on deals that resulted in losses. Thus, if a bitcoin investor has paid in cryptocurrency trades, they should document an ITR.

Learn more about cryptocurrencies according to the 2022 budget:

The income tax branch stated that for transactions involving the transfer of one virtual digital asset (VDA) for another, taxes would need to be withheld by both the buyer and the seller. The buyer will be required to subtract tax in a peer-to-peer trade of VDA, according to the Central Board of Direct Taxes (CBDT) and section 194S of the I-T Act.

2. Effects of the new rules on doctors and social media influencers:

Jitendra Solanki, a tax and investment specialist, registered with SEBI, explained Section 194R would operate as follows: "If a doctor accepts samples from a medication manufacturing firm and the value of all of these samples received exceeds 20,000 in one fiscal year, then it will generate 10% TDS. However, if the doctor works for a government clinic, the facility will be charged 10% of TDS. It is crucial to understand that government organisations are not covered by Section 194R. Therefore, a doctor working for a government institution is exempt from paying the 10% TDS if they get free medical samples.

Influencers will have to reveal the free products they obtain from companies or businesses when completing their tax returns, and TDS will be charged if they keep the items because they will be considered perquisites. TDS won't be applicable if the influencer decides to return the free samples.

Conclusion:

The national government is working to broaden its tax base. To raise more money for taxes, it implemented a 1% TDS on all digital currencies over INR 10,000 earlier this year. Together with cryptocurrencies, the government is considering incorporating several industries under the GST umbrella, including videogames, internet betting, and casinos.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.