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P2P crypto deals: Tax deduction onus on buyer

After issuing guidelines about tax deducted at source (TDS) on virtual digital assets (VDAs) applicable to crypto exchanges, the Central Board of Direct Taxes (CBDT) has issued norms for peer-to-peer cryptocurrency transactions that do not involve an exchange.

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With introduction of the Section 194S in the Income Tax Act through the Finance Act 2022, a TDS of 1% will be levied on transfer of VDAs effective July 1 if the value of transactions exceeds Rs 10,000 in a year.

After issuing guidelines about tax deducted at source (TDS) on virtual digital assets (VDAs) applicable to crypto exchanges, the Central Board of Direct Taxes (CBDT) has issued norms for peer-to-peer cryptocurrency transactions that do not involve an exchange.

“…any person who is responsible for paying to any resident any sum by way of consideration for transfer of VDA is required to deduct tax. Thus, in a peer to peer (i.e. buyer to seller without going through an exchange) transaction, the buyer (i.e person paying the consideration) is required to deduct tax under section 194S of the (Income Tax) Act,” the direct tax department noted in a circular.

With introduction of the Section 194S in the Income Tax Act through the Finance Act 2022, a TDS of 1% will be levied on transfer of VDAs effective July 1 if the value of transactions exceeds Rs 10,000 in a year. “After deduction, the deductor is required to furnish a quarterly statement (in Form No. 26Q) for all such transactions of the quarter on or before the due date prescribed in the Income-tax Rules, 1962,” the circular added.

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