NEW DELHI: The Income Tax Department on Wednesday said the 1% withholding tax deducted (TDS) when transmitting from virtual digital assets on the net transaction value and the obligation to deduct the tax would lie primarily with the stock exchanges.
The Central Council for Direct Taxes (CBDT) has published an FAQ on the subject TDS Terms on virtual digital assets (VDAs) or cryptocurrenciesintroduced in the budget and effective from July 1st.
The FAQ stated that in a peer-to-peer transaction, the buyer paying the consideration is asked to deduct the TDS.
However, if the transaction is through an exchange, the responsibility for deducting TDS rests with the exchange crediting or making the payment to the seller.
If the credit/payment is made between the exchange and the seller through a broker (and the broker is not a seller), there must be a written agreement that the broker will deduct the tax. The FAQ goes on to state that for the transfer of VDAs owned by the exchanges, the buyer or his broker would be required to withhold the tax.
It has also been clarified that the TDS is based on the “net” consideration after excluding GST/fees charged by the withholding agent for the provision of the service.
Commenting on the FAQ, AKM Global’s tax partner, Amit Maheshwari, said broadly that the responsibility for withdrawing TDS has been placed on exchanges, which will increase the regulatory and compliance burden on them.
The Central Council for Direct Taxes (CBDT) has published an FAQ on the subject TDS Terms on virtual digital assets (VDAs) or cryptocurrenciesintroduced in the budget and effective from July 1st.
The FAQ stated that in a peer-to-peer transaction, the buyer paying the consideration is asked to deduct the TDS.
However, if the transaction is through an exchange, the responsibility for deducting TDS rests with the exchange crediting or making the payment to the seller.
If the credit/payment is made between the exchange and the seller through a broker (and the broker is not a seller), there must be a written agreement that the broker will deduct the tax. The FAQ goes on to state that for the transfer of VDAs owned by the exchanges, the buyer or his broker would be required to withhold the tax.
It has also been clarified that the TDS is based on the “net” consideration after excluding GST/fees charged by the withholding agent for the provision of the service.
Commenting on the FAQ, AKM Global’s tax partner, Amit Maheshwari, said broadly that the responsibility for withdrawing TDS has been placed on exchanges, which will increase the regulatory and compliance burden on them.
