TDS on cryptocurrencies from July 1: Onus on buyers for transactions outside exchange
BENGALURU: The Central Board of Direct Taxes (CBDT) on Tuesday clarified that in the case of the transfer of virtual digital assets (VDA) in a peer-to-peer (buyer to the seller without going via an exchange) transaction, 1% tax deducted at the source (TDS) will be deducted by the buyer before paying the consideration to the seller.
The tax deducted from the seller will be required to deposit with the government. With this, the compliance burden will increase for the buyers. Last week, the income tax department released detailed guidelines on TDS for VDAs such as cryptos and said exchanges have to deduct TDS if transactions happen on or through the exchange.
From July 1, the transfer of VDAs will attract 1% TDS under section 194S of the Income tax Act. The department said the TDS should be in consideration for the transfer of VDA less GST. “After deduction, the deductor is required to furnish a quarterly statement for all such transactions of the quarter on or before the due date prescribed in the Income-tax Rules, 1962,” CBDT said.
Also, if the consideration is in kind or in exchange for VDA, the person responsible for paying such consideration is required to ensure that the tax required to be deducted has been paid in respect of such consideration, before releasing the consideration, it added. Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm, said the previous circular on VDAs didn’t deal with the withholding obligations in the case of peer-to-peer transactions.
CBDT guidelines on virtual digital assets
Last week, the income tax department released detailed guidelines on TDS for VDAs such as cryptos and said exchanges have to deduct TDS if transactions happen on or through the exchange