The Indian Income Tax Department has issued detailed guidelines for TDS deductions of 1% for Virtual Digital Assets (VDA) under Section 194S, which will take effect from July 1. Form 26QE, a new challan-cum-statement, is introduced for implementing the same.
The Finance Bill 2022 proposed a new section 194S, effective July 1, requiring a 1% tax deduction at source (TDS) on transferring a VDA.
The threshold amount liable under this new section varies depending on the category of person.
Individuals or HUFs who are required to have their accounts audited under the Income Tax Act are considered a “specified person”.
To come under the radar of section 194S, the amount for purchase of VDA should exceed Rs. 50,000, and in any other category of person, the amount of purchase consideration of VDA should exceed Rs. 10,000.
The Indian Central Board of Direct Taxes (CBDT) showcases a timeline for parties to report a VDA transaction.
Form 26QE must be used to report TDS that was collected in accordance with Section 194S and deposited within 30 days of the end of the month in which the deduction was made.
The Indian government emphasized that if the crypto transaction takes place on or through an exchange, there is a possibility of a tax deduction requirement under section 194S at multiple stages.
The crypto exchanges’ responsibility to deduct TDS and compliance burden has now increased.