The rules for deduction of tax at source on Virtual Digital Assets (VDA) and cryptocurrencies have come into effect from Friday (July 1). The rules make it mandatory for the buyer of a VDA to deduct 1 per cent of the amount paid to the seller (resident Indian) as Tax Deduction at Source (TDS). Here are the details about the new rules:
What are the new rules
According to a circular of the Central Board of Direct Taxes (CBDT), the Finance Act, 2022 incorporated a new section 194S in the Act with effect from July 1, 2022. The new clause mandates a person who is liable to pay someone. resident of any amount by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1 per cent of such amount as income-tax thereon. Tax should be deducted at the time of credit of such amount to the resident’s account or at the time of payment, whichever is earlier.
In which cases TDS deduction is not required?
As per CBDT circular, deduction is not required in cases where:
(i) the consideration is payable by a “specified person” and the value or aggregate value of such consideration does not exceed fifty thousand rupees during the financial year; either
(ii) the consideration is payable by a person other than a specified person and the value or aggregate value of such consideration during the financial year does not exceed Rs.10,000.
Who is a “Specified Person”?
i) an individual or Hindu Undivided Family (HUF) who does not have any income under the head “Profits and gains of business or profession”; And
(ii) an individual or HUF whose income is covered under the head “Profits and gains of business or profession” whose total sales/gross receipts/turnover from the business carried on by him does not exceed rupees one crore or the amount used by him 50 lakhs in case of profession does not exceed Rs. This limit should be observed in the financial year immediately preceding the financial year in which the VDA is transferred.
Will TDS be applicable from both buyer and seller side?
The CBDT has said that if the buyer has deducted tax under section 194S of the Income Tax Act, the seller will not be required to deduct it on the same transaction. To facilitate proper implementation, the seller may take an undertaking from the buyer regarding deduction of tax.
Any amount deducted under section 194S is to be paid to the Central Government within 30 days from the end of the month in which the deduction was made. As per the new rules, the person responsible for deducting tax must give a TDS certificate to the payer within 15 days from the due date of reporting it to the government.
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