Income Tax of Virtual Digital Assets : CBDT issues guidelines on 1% TDS from 1st July
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Biznextindia : The Income Tax Department on Wednesday notified the disclosure norms for Tax Deducted at Source (TDS) for virtual digital assets (VDAs). IT Department’s Central Board of Direct Taxes (CBDT) on June 21 notified of the changes in rules pertaining to filings of TDS returns in Form 26QE and Form 16E.
As per CBDT circular, a TDS of 1% will be levied on any transactions exceeding Rs 10,000 in a year on crypto assets under the newly introduced Section 194S of the I-T Act from July 1.
“Finance Act 2022 inserted a new section 194S in the Income-tax Act, 1961 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% 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” the notification said.
“According to section 194S of the Act, any person who is responsible for paying to any resident any sum by way of consideration for transfer of VDA is required to deduct tax. Thus, in a peer to peer (i.e. direct buyer to seller) transaction, the buyer (i.e person paying the consideration) is required to deduct tax under section 194S of the Act” the circular said.
Whether the provision of section 194Q of the Act is also applicable on transfer of VDA?
Without going into the merit whether VDA is goods or not, it is clarified that once tax is deducted under section 194S of the Act, tax would not be required to be deducted under section 194Q of the Act.
Whether the consideration for transfer of VDA shall be on Gross basis after including GST/commission or it shall be on “net basis” after exclusion of these items ?
In order to remove difficulty, it is clarified that the tax required to be withheld under section 194S of the Act shall be on the “net” consideration after excluding GST/charges levied by the deductor for rendering service.