Transactions to paper trail:
CBDT clears the air on TDS levy on cryptos
Central Board of Direct Taxes (CBDT) has issued detailed guidelines on
facilitating tax deducted at source (TDS) on virtual digital assets (VDA) or
crypto assets, under which date of transfer and mode of payment will have to be
July 1, TDS of 1 per cent will be levied on payments towards virtual digital
assets or cryptocurrencies beyond Rs 10,000 in a year, as the Finance Act 2022
has introduced Section 194S in the income tax (I-T) Act.
department has explained different scenarios through six questions to remove
the new regime, the transactions will have to be disclosed in the tax return
and a paper trail will have to be maintained.
would be helpful to both buyers and sellers since they can enter into contracts
with the exchange for passing the responsibility to deduct tax on their behalf
on virtual asset transfers or otherwise as well.
CBDT has pragmatically covered the practical scenarios to facilitate smooth
implementation of the withholding on consideration for transfer of VDAs.
Broadly, the responsibility to deduct TDS has been put on the exchange which
will increase the regulatory and compliance burden for them, said Amit
Maheshwari, tax partner, AKM Global, a tax and consulting firm.
a case where the transfer of VDA takes place on or through an exchange and the
VDA being transferred is owned by such exchange, while the primary
responsibility to deduct tax under section 194S of the Act, in this case,
remains with the buyer or his broker, as an alternative the exchange may enter
into a written agreement with the buyer or his broker that in regard to all
such transactions the exchange would be paying the tax on or before the due
date for that quarter.
Exchange would be required to furnish a quarterly statement (in Form No. 26QF)
for all such transactions of the quarter on or before the due date prescribed
in the I-T rules.
finance ministry is also working on an FAQ on the taxation of cryptocurrency,
which will provide further clarifications on the applicability of income tax on
virtual digital assets.
1 per cent TDS on payments over Rs 10,000 towards virtual currencies has also
been introduced. The threshold limit for TDS would be Rs 50,000 a year for
specified persons, which includes individuals/HUFs who are required to get
their accounts audited under the I-T Act.