Tax department issues clarifications on 1% TDS on crypto transaction

In a move to levy one percent TDS on the virtual digital assets the Central Board of Direct Taxes (CBDT) has issued guidelines.

The government introduced a TDS of 1% on payment for transfer of virtual digital asset to a resident in the Finance Act of 2022 

As per the new rules, any sum 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 is made. 

Also, it has to be reported in a new form 26QE notified on Wednesday within the same period. 

The new rules also say that the person responsible for deduction of tax should give a TDS certificate to the payee within 15 days from the due date for reporting it to the government. 

The new section mandates that a person paying by way of virtual digital assets (VDAs) or crypto assets to deduct tax deducted at source (TDS) at the rate of 1% of the consideration.

According to the circular, since the threshold of ₹50,000 (or ₹10,000) is with respect to the financial year 

Keep in mind that as per the taxation provisions, if the deductee does not furnish his PAN to the deductor, the TDS shall be deducted at the rate of 20% as prescribed under Section 206AA. 

No TDS is applicable if the payer is a specified person (an individual or Hindu Undivided Family (HUF), who is not subject to tax audit) and 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.