TDS on Crypto from July 1, IT Department issues guidelines

New Delhi: The Central Board of Direct Taxes (CBDT) has issued the guidelines on the levy of Tax Deducted at Source (TDS) on virtual digital assets or crypto. The guidelines will come into effect from July 1.

Earlier, Finance Minister Nirmala Sitharaman in Union Budget 2022 introduced a 1% TDS levied on payments made on the transfer of virtual digital assets (VDA). A levy of 30% was also announced on virtual assets including cryptocurrency and non-fungible tokens (NFTs). In a notification CBDT also stated, “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.”

Here are some highlights from the new rules:

• CBDT said that if the buyer has deducted tax under Section 194S of the Income Tax Act, on the same transaction, the seller will then not be required to deduct it.
• Any amount deducted under section 194S is to be paid to the central government within 30 days from the end of the month in which the deduction was made. Also, the entity responsible for the deduction of tax should give a TDS certificate to the payee within 15 days from the due date for reporting it to the government.
• In case of a transaction made through an Exchange, the tax may be deducted by the Exchange.

In what cases deduction is not required?

1. “The consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed Rs 50,000 during the financial year; or
2. The consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed Rs 10,000 during the financial year.”

Note: On the computation of Rs. 50,000 or Rs. 10,000 limits CBDT said that since the threshold of Rs. 50,000 or Rs. 10,000 is with respect to the financial year, the calculation of consideration for transfer of VDA triggering deduction under the Section 194S of the Act shall be counted from April 1, 2022. It added that any such sum, credited or paid before July 1, 2022, would not be subjected to tax deduction under Section 194S of the Act.