The Burden Of Deriving TDS Is Mainly On Crypto Exchanges: CBDT FAQ

The Income Tax Department said on Wednesday that the 1% TDS on the transfer of virtual digital assets would be levied on the net value of the transaction and the burden of deducting the tax would fall primarily on the exchanges.

The Central Board of Direct Taxes (CBDT) has published a FAQ on the provisions of the TDS on virtual digital assets (VDAs) or cryptocurrencies, which was canceled in the 2022-23 budget and will come into effect on July 1.

Advertising

Advertising

The frequently asked questions (FAQ) indicates that in a transaction between individuals (direct buyer to seller), the buyer paying the consideration will have to deduct the tax withheld at source (TDS).

However, in the event that the transaction takes place through an exchange, the burden of deducting the TDS will be on the exchange crediting or making payment to the seller.

In the event that the credit/payment between the exchange and the seller is through a courtier (and the courtier is not the seller), there must be a written agreement that the courtier will deduct the tax.

“The Exchange would be required to furnish a quarterly statement (on Form 26QF) for all such quarterly transactions on or before the due date prescribed in the Income Tax Rules 1962,” the CBDT said.

The FAQ further states that for the transfer of VDAs belonging to exchanges, the buyer or his courtier would be required to deduct the tax.

Alternatively, the exchange may enter into a written agreement with the buyer or his courtier that, in respect of all such transactions, the exchange would pay tax on or before the due date for that quarter.

With respect to in-kind or in-exchange transactions from another VDA, the FAQ states that the exchange will enter into a written contractual agreement with buyers/sellers for tax deduction.

“In these situations, the person responsible for paying that consideration is required to ensure that the tax to be deducted has been paid in respect of that consideration, before releasing the consideration,” he added.

On whether the consideration for the transfer of VDA should be on a gross basis after including GST/commission or on a “net basis” after excluding these items, he clarified that TDS will be on the consideration “ net” after excluding the GST/expenses levied by the deductible for service rendered.

Commenting on the FAQ, AKM’s Global Tax Partner Amit Maheshwari said generally that the responsibility for deducting TDS has been put on exchanges, which has increased the regulatory and compliance burden for them.

“Exchanges need to further disclose these transactions in their tax returns and keep proper records. However, it would be useful for both buyers and sellers, as they can enter into contracts with the exchange to pass on the responsibility of deducting tax on their behalf. in VDA to VDA transfers or otherwise,” Maheshwari added.

Budget 2022-23 clarified the collection of income tax on crypto assets. Since April 1, a 30% income tax, plus tax and surcharges, has been levied on such transactions in the same way as it treats winnings from horse racing or other speculative transactions.

A 1% TDS on payments over Rs 10,000 to virtual currencies has also been introduced, which will come into effect from July 1.

The threshold limit for TDS would be Rs 50,000 per annum for designated persons, which includes individuals/HUFs who are required to have their accounts audited under the Information Technology Act.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear reader,

Business Standard has always endeavored to provide up-to-date information and commentary on developments that matter to you and that have wider political and economic implications for the country and the world. Your constant encouragement and feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these challenging times imposed by Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative opinions and incisive commentary on applicable topical issues.
However, we have a request.

As we battle the economic impact of the pandemic, we need your support even more so that we can continue to bring you more great content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of bringing you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism we are committed to.

Support quality journalism and subscribe to Business Standard.

digital editor

We would like to say thanks to the writer of this article for this remarkable material

The Burden Of Deriving TDS Is Mainly On Crypto Exchanges: CBDT FAQ


You can find our social media profiles , as well as the other related pageshttps://metfabtech.com/related-pages/