The Central Board of Direct Taxes (CBDT) vide Notification No. 74/2022 dated 30.06.2022 in S.O. 2958(E) has excluded Gift card or vouchers, Mileage points, reward points or loyalty card from the definition of Virtual Digital Assets (VDAs) as per the provisions of section 2(47A) of the Income-tax Act, 1961 (‘Act’).
Finance Act, 2022 has provided to levy income tax on virtual digital asset transactions. For this purpose, a new clause (47A) is inserted to section 2 of the Act to define the expression “virtual digital asset” to mean,–
(a) any information or code or number or token (not being Indian currency or any foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account including its use in any financial transaction or investment, but not limited to investment scheme and can be transferred, stored or traded electronically;
(b) a non-fungible token or any other token of similar nature by whatever name called;
(c) any other digital asset as may be notified by the Central Government in the Official Gazette in this behalf,
It is further provided that the Central Government may, by notification in the Official Gazette, exclude any digital asset from the definition of the virtual digital asset subject to such conditions as may be specified therein.
By exercising these powers so conferred by the proviso to section 2(47A), CBDT has excluded the following from the definition of virtual digital asset-
(i) Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;
(ii) Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;
(iii) Subscription to websites or platforms or application.
As per the notification, gift cards or vouchers that may be used to obtain goods or services at a discount or redeemed to buy goods or services are excluded from VDAs. It means if the gift cards or vouchers are encashed for money, the same may be treated as VDA if the same comes under the definition of VDAs.
Similar is the case for mileage points, reward points or loyalty cards under an award, reward, benefit, loyalty, incentive, rebate or promotional program. If the same is used for buying goods or services or to get discounts on goods and services, the same will be excluded from the definition of VDAs.
It is further provided that the definition of VDA as contained in section 2(47A) shall exclude any subscription to a website or platform or application.
As a result, these transactions will not be charged to tax as per the provisions of section 115BBH of the Act. further, no TDS under section 194S of the Act in case of transactions of these assets.
Read the full text of CBDT Notification No. 74/2022 dated 30.06.2022 on Exclusions from Virtual Digital Assets
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 30th June, 2022
(Income-tax)
S.O. 2958(E).–In exercise of the powers conferred by proviso to clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies following virtual digital assets which shall be excluded from the definition of virtual digital asset:
(i) Gift card or vouchers, being a record that may be used to obtain goods or services or a discount on goods or services;
(ii) Mileage points, reward points or loyalty card, being a record given without direct monetary consideration under an award, reward, benefit, loyalty, incentive, rebate or promotional program that may be used or redeemed only to obtain goods or services or a discount on goods or services;
(iii) Subscription to websites or platforms or application.
2. This notification shall come into force from the date of publication in the Official Gazette.
[Notification No. 74/2022/F. No. 370142/29/2022-TPL (Part-I)]
ANKIT JAIN, Under Secy.
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