India’s Central Board of Direct Taxes (CBDT) has clarified the queries related to TDS (Tax Deducted at Source) on virtual digital assets which will encompass all Crypto coins and tokens.
It was earlier proposed in the annual budget for the current year that 1% TDS will be levied on all crypto transactions over and above Rs 10,000 from July 1, 2022. Apart from TDS, an income tax of 30% was also stated for all kinds of gains in digital assets. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs.
The Finance Act 2022 has introduced a new Section 194S in the Income Tax Act. According to this, the IT department requires a detailed explanation for all TDS deductions on virtual assets alongwith the date and mode of payment whether cash or kind. The new tax regime has put the responsibility of deducting TDS largely on crypto exchanges.
CBDT came up with a few amendments in respect to TDS returns in Form 26QE and 16E. Further, the tax collected must be deposited within 30 days from the end of the month in which tax was deducted. For example, if the TDS has been deducted on 17 July 2022, then it must be deposited by August 30, 2022. This shall be made in the challan-cum-statement Form 26QE.
As per new guidelines, the exchange needs to furnish a statement for all such transactions on quarterly basis. According to the new rules, if the mode of transaction is in kind or in exchange for another digital asset, the person responsible for paying such consideration is required to ensure that the TDS for the transaction has been paid.
In addition to this, the finance ministry is also set to bring more clarity on taxation of cryptocurrency by releasing an FAQ.
