How much and how will tax be deducted on cryptocurrency transactions? CBDT clarified everything

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New Delhi. The Central Board of Direct Taxes (CBDT) has issued guidelines regarding Tax on Virtual Digital Assets (VDA) or Crypto Assets (TDS). From July 1, 2022, that is, from a date of the next month, they will come into force.

Now TDS (Tax Deducted at Source) of 1 per cent will be levied on the payment made for the sale of virtual assets. This tax will be applicable on payments made for cryptocurrencies above Rs 10,000 in a year. Finance Minister Nirmala Sitharaman announced this while presenting the budget this time. It was introduced under section 194S of the Finance Act 2022.

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Must be disclosed in tax return

The department has given information about different scenarios through six questions to overcome the difficulties. Under the new regime, the transaction will have to be disclosed in the tax return and a paper trail will have to be maintained.

This will be helpful for both buyers and sellers, as they can also contract with the exchange to hand over the responsibility of deducting tax on their behalf on virtual asset transfer or otherwise.

The responsibility of deducting TDS on the exchange

According to a Business Standard news report, Amit Maheshwari, tax partner, tax and consulting firm AKM Global, said the CBDT has covered the practical scenarios well to facilitate smooth implementation of withholdings pending for transfer of VDAs. Broadly speaking, the responsibility of deducting TDS has been passed on to the exchanges, which will increase the regulatory and compliance burden for them.

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Can exchange contract with buyer or broker

In cases where the transfer of VDAs takes place on or through an exchange and the VDA being transferred belongs to the exchange itself, the primary responsibility for deduction of tax under section 194S of the Act in this case rests with the buyer or his broker. Will be. Alternatively, the Exchange may enter into a written agreement with the Buyer or its broker that the Exchange shall pay tax in respect of all such transactions for the quarter on or before a fixed date.

The Exchange shall furnish a quarterly statement (in Form No. 26QF) for all such transactions of the quarter on or before the date prescribed in the Income Tax Rules.

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Ministry working on FAQ

The Finance Ministry is also working on a frequently asked questions (FAQ) on the taxation of cryptocurrencies, which will provide more detailed information regarding income tax on virtual digital assets.

1 percent TDS has also been introduced on payment of more than Rs 10,000 for virtual currencies. The TDS limit will be Rs 50,000 per annum for certain individuals, including individuals/HUFs who are required to get their accounts audited under the Income Tax Act.

Tags: crypto, Direct tax, income tax

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