The Central Board of Direct Taxes (CBDT) on Wednesday issued a circular containing guidelines to remove difficulties with regard to tax deducted at source (TDS) at the rate of 1% on transfer of virtual digital assets (VDA) by payers with effect from July 1.
“One good thing is that the tax department tried to restrict the TDS obligation at only one party level in a scenario where there could be four parties — a seller, an exchange, a buyer and a broker,” said EY India Tax Leader Sudhir Kapadia. The other three parties in the transaction will give only an undertaking that TDS liabilities have been discharged.
Kapadia, however, said if the consideration is paid in kind instead of cash for the VDA, it is very complicated and imposes a high obligation cost on the exchanges as they have to maintain paper trail of valuation, TDS accurately calculated or not, etc.
With respect to the requirements of Section 194S, CBDT has notified that any sum deducted by specified persons will have to be deposited within 30 days from end of the month in which deduction is made. Deposit of tax so deducted shall be made in challan-cum-statement in Form 26QE. Further, the deductor will have to issue certificate of deduction in Form No 16E to the deductee, within 15 days of due date in Form No 26QE.
In Form 26Q, columns have been added in annexure to furnish details like amount of deposit, BSR code of bank, date of payment and challan serial number are required.
“Broadly, to furnish Form 26QE, the specified persons would be required to maintain details like date of transfer of VDAs, value of consideration, mode of consideration- whether cash or kind or in exchange of another VDA etc,” said by Neeraj Agarwala, Partner, Nangia Andersen. Besides TDS, the Budget for FY23 mandated tax any income from the transfer of VDAs at 30%, with no deduction and set off of losses.