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P2P crypto deals: Tax deduction onus on buyer

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

By: ENS Economic Bureau | New Delhi |
Updated: June 29, 2022 7:40:17 am
Bitcoin, crypto, crypto currencyThis circular clarifies the mechanism of deducting tax in such transactions in greater detail and provides more clarity. (Express file photo)

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 per cent 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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Commenting on the new circular, AKM Global Tax Partner Amit Maheshwari said: “The previous circular on VDAs did not deal with the withholding obligations in case of peer to peer transactions. This circular clarifies the mechanism of deducting tax in such transactions in greater detail and provides more clarity. This shall increase the compliance burden for both buyers and sellers in transactions happening outside exchanges as unlike in the case of exchange, where the exchange would have taken care of these compliances, here the buyer will have to do the compliances”.

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First published on: 29-06-2022 at 05:00:59 am

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