The rules regarding the tax deducted at source on virtual digital assets (VDAs) and cryptocurrencies have come into effect from Friday (July 1). The rules make it mandatory for the purchaser of a VDA to deduct 1 per cent of the amount paid to the seller (resident Indian) as income tax deducted at source (TDS). Here’re details about the new rules:
What the New Rules Say
According to a circular by the Central Board of Direct Taxes (CBDT), the Finance Act, 2022, inserted a new section 194S in the Act with effect from 1st July 2022. The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1 per cent of such sum as income tax thereon. The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier.
In What Cases Is TDS Deduction Not Required?
According to the CBDT circular, the 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; or
(ii) The consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed Rs 10,000 during the financial year.
Who Is A “Specified Person”?
i) An individual or Hindu undivided family (HUF) who does not have any income under the head “profit and gains of business or profession”; and
(ii) An individual or HUF having income under the head “profits and gains of business or profession”, whose total sales/gross receipts/turnover from business carried on by him does not exceed one crore rupee or in case of profession exercised by him does not exceed Rs 50 lakh. This threshold is to be seen in the financial year immediately preceding the financial year in which the VDA is transferred.
Will TDS Be Applicable At Both The Ends — Buyer and Seller?
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 the proper implementation, the seller may take an undertaking from buyer regarding the deduction of tax.
Any sum 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. The person responsible for the deduction of tax should give a TDS certificate to the payee within 15 days from the due date for reporting it to the government, according to the new rules.
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