New Delhi. The Central Board of Direct Taxes (CBDT) on Tuesday issued a clarification on transactions in cryptocurrencies. The Income Tax Department said on Tuesday that both buyers and sellers will have to deduct TDS (tax deducted at source) from their level in exchange for digital assets (VDA) or cryptocurrencies. According to section 194S of the Income Tax Act, the CBDT has stated that the purchaser is required to deduct tax during the VDA transaction.
The CBDT, the governing body of the Income Tax Department, has stated that in digital asset transactions conducted off-exchange, the buyer must deduct tax under section 194S of the Income Tax Act. The CBDT also emphasized that the individual responsible for this liability must ensure that the deducted tax has been paid.
How to pay TDS
The CBDT, trying to explain this through an example, said that if ‘A’ VDA is being given in lieu of ‘B’ VDA, then in this situation both the parties are the buyer as well as the seller. In this context, both parties will have to pay tax in respect of VDA transactions, the CBDT said. The other party will have to give evidence of this so that the two VDAs can be swapped. Then both parties will have to mention the same along with the challan number in the TDS statement.
relief for buyers
Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP said that the CBDT has arranged for the buyer to ensure that the seller has paid the appropriate taxes before issuing the return. He said that this arrangement has come as a relief to the buyers. Otherwise, the buyers would have to bear the cost of TDS on their own and there would be no scope for recovery from the seller.
TDS will be charged from July 1
Last week, the CBDT announced that exchanges will primarily be responsible for deducting one percent of TDS on VDA transactions. The budget for the financial year 2022-23 had previously declared the imposition of TDS on cryptocurrencies or VDAs, with effect from July 1.
30 percent income tax also
This year’s budget has brought clarity regarding the imposition of income tax on crypto assets. From April 1, such transactions will attract 30 percent income tax in addition to cess and surcharge. It was also proposed to levy one percent TDS on payments of more than Rs 10,000 in digital currency. This will come into effect from July 1. The limit for TDS for prescribed individuals is Rs 50,000 per annum. This includes individuals/Hindu Undivided Families. They will need to get their accounts audited under the Income Tax Act.