The Income Tax Department on June 28 said that both buyer and seller will have to withhold taxes for transactions involving exchange of one virtual asset for another.
Highlight
- As per Section 194S of the IT Act, the buyer has to deduct tax in peer-to-peer transactions
- VDA or TDS provisions on cryptocurrencies, announced in the budget for 2022-23, will be effective from July 1
- The budget for 2022-23 brings clarity with regard to the imposition of income tax on crypto assets
business news updatesThe Income Tax Department on Tuesday (June 28) said that both buyer and seller will have to withhold taxes for transactions involving exchange of one virtual asset for another.
Issuing another set of clarifications, the Central Board of Direct Taxes (CBDT) also said that as per Section 194S of the IT Act, the buyer has to deduct tax in peer-to-peer transactions of Virtual Digital Assets (VDAs). Will be
CBDT said, “Thus, in a peer-to-peer (i.e. buyer to seller without passing through an exchange) transaction, the buyer (i.e. the person paying the consideration) is required to deduct tax under section 194S of the Act. CBDT said.
With regard to the liability to deduct tax at source under section 194S of the Act, when the consideration is in kind or in lieu of VDA, the CBDT said that in this case, the person responsible for paying such consideration has to There is a need to ensure that the tax required to be paid in respect of such consideration, has been paid before the issuance of the consideration.
Giving an example, CBDT said that in a situation where VDA “A” is being exchanged with another VDA “B”, both the persons are buyer as well as seller. One is buyer for “A” and seller for “B” and the other is buyer for “B” and seller for “A”.
“Thus both need to pay tax in respect of transfer of VDA and show proof to the other so that VDA can be exchanged. Thereafter both of them will be required to report in TDS details along with challan number, CBDT said.
What Nangia Andersen LLP Partner Sandeep Jhunjhunwala said?
Nangia Andersen LLP Partner Sandeep Jhunjhunwala said that where the consideration is partly and the cash component is not sufficient to discharge the TDS liability, the CBDT has provided relaxation to the buyer to ensure that the seller has taken the consideration before issuing Appropriate taxes have been paid.
Jhunjhunwala said, “This comes as a relief to those buyers who, without this clarification, will have to bear the TDS cost without any recourse for recovery from the seller and the seller will be liable to pay the undue amount of such taxes settled by the buyer.” Stops taking credit.” ,
What did AKM Global Tax Partner Amit Maheshwari say?
AKM Global Tax Partner Amit Maheshwari said that this would increase the compliance burden for both buyers and sellers in off-exchange transactions, in case of an exchange where the exchange would take care of these compliances, here the buyer would have to comply.
“Though the buyer and seller will not be required to apply for TAN for depositing TDS under 194S, it will still be necessary to comply with the other implications of section 206AA for not furnishing PAN to each other. Also, a Bar withholding is done under 194S, under any other section and there is no need to withhold,” he said.
Om Rajpurohit, Director (Corporate and International Tax), AMRG & Associates, said what?
Om Rajpurohit, Director (Corporate and International Tax), AMRG & Associates, said the strict TDS compliance requirement while trading in virtual digital assets is understandable, as the government does not want to promote such trading, while dealing with unaccounted funds. Reiterates its firm stand against any misuse.
Last week, the CBDT had clarified that in case of VDA transactions taking place through exchanges, the onus of deducting 1 per cent TDS would be primarily on the exchanges.
The VDA or TDS provisions on cryptocurrencies, announced in the budget for 2022-23, will be effective from July 1.
The Budget for 2022-23 has brought clarity regarding the imposition of income tax on crypto assets. From April 1, 30 per cent IT plus cess and surcharge is levied on such transactions in the same manner as it treats winnings from horse racing or other speculative transactions.
1 per cent TDS has also been introduced for virtual currencies on payments above Rs 10,000, which will be applicable from July 1. The TDS limit will be Rs 50,000 per annum for specified persons, including such individuals/HUFs who are required to get their accounts audited under the IT Act.
(with PTI inputs)
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