CBDT provides clarity on TDS on crypto payments
If the consideration is in kind or in exchange for another crypto, both buyer and seller have to pay the tax deducted at source (TDS) on crypto transactions.
PremiumIn a peer-to-peer (P2P) transaction, a buyer paying cash for the transfer of virtual digital assets (VDAs) or crypto assets has to deduct tax at source at the rate of 1% and deposit the amount with the government, the income-tax department clarified on Tuesday.
Further, if the consideration is in kind or in exchange for another crypto, both buyer and seller have to pay the tax deducted at source (TDS) on crypto transactions.
The clarification is a part of the circulars that the Central Board of Direct Taxes (CBDT) has been issuing for removing difficulties with regard to the implementation of TDS on crypto transactions.
The department had last week issued guidelines for crypto transactions conducted via exchanges. However, experts opined that the circular did not deal with obligations in the case of P2P transactions.
CBDT in the latest circular has said that if a person is paying to any resident any sum for the transfer of digital assets, he or she is required to furnish a quarterly statement (in Form No. 26Q) for all such transactions of the quarter.
In the cases where payments are in form of another crypto, the person responsible for paying such consideration has to ensure that the tax deducted has been paid, before releasing the consideration.
According to the department, if one VDA is being exchanged with another, both the persons are buyer as well as seller. Thus, both need to pay tax with respect to the transfer of VDA and show the evidence to others so that VDAs can then be exchanged.
The proof exchange would then be required to be reported in the TDS statement along with the challan number by both seller and buyer.
“This shall increase the compliance burden for both buyers and sellers in transactions happening outside exchanges unlike in the case of an exchange, where the exchange would take care of these compliances," said Amit Maheshwari, tax partner at AKM Global, a tax and consulting firm.
As per the income-tax provisions, no TDS would be applicable if the payer is a specified person (an individual or Hindu Undivided Family (HUF), who is not subject to tax audit) and the aggregate value of consideration is less than ₹50,000 during the financial year. In other cases, no TDS is applicable if the consideration does not exceed ₹10,000 in aggregate during a financial year.
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