The rules regarding the withholding tax on virtual digital assets (VDAs) and cryptocurrencies came into effect from Friday (July 1). The rules require the buyer of a VDA to deduct 1 percent of the amount paid to the seller (Resident Indian) as a withholding tax (TDS). Here are details on the new rules:
What the new rules say
According to a circular from the Central Board of Direct Taxes (CBDT), the Financing Act 2022 inserted a new section 194S into the law with effect from July 1, 2022. The new section requires a person responsible for paying to resident any amount as consideration for the transfer of a virtual digital asset (VDA), to deduct an amount equal to 1 percent of that amount as income tax. The tax deduction must be made at the time such amount is credited to the resident’s account or at the time of payment, whichever is earlier.
In which cases is TDS deduction not required?
According to the CBDT circular, the deduction is not required in cases where:
(i) The fee is paid by a “specified person” and the value or aggregate value of such fee does not exceed fifty thousand rupees during the financial year; or
(ii) The fee is payable by any person other than a specified person and the value or aggregate value of such fee does not exceed Rs 10,000 during the financial year.
Who is a “certain person”?
i) A natural person or a Hindu undivided family (HUF) who has no income under the heading of “profit and profit from business or profession”; and
(ii) A person or HUF with income under the heading of “profit and profit from business or profession”, whose total turnover/gross income/turnover from business carried on by him does not exceed one crore rupee or in the case of a profession practiced by him does not exceed Rs 50 lakh. This threshold can be seen in the financial year immediately preceding the financial year in which the VDA is transferred.
Will TDS apply on both ends – buyer and seller?
CBDT has said that if the buyer has withheld tax under Section 194S of the Income Tax Act, the seller is not required to deduct this tax for the same transaction. To facilitate proper execution, the seller may make a commitment from the buyer regarding the deduction of tax.
Any amount withheld under Section 194s must be paid to the central government within 30 days of the end of the month in which the deduction was made. Under the new rules, the person responsible for the tax deduction must provide the beneficiary with a TDS certificate within 15 days from the government filing due date.
Get all the latest news, breaking news, watch top videos and live TV here.
