The latest guidelines from the Central Board of Direct Taxes (CBDT) explains who is covered under the tax deducted at source obligation while transacting on virtual digital assets and at what level of income the obligation to deduct tax kicks in.
In general, the obligation to deduct 1% TDS applies to a person paying any resident for a VDA but there is a carveout for individuals and Hindu Un-divided Families (HUFs) with no business or professional income or having specified turnover levels.
If the payment is less than ₹50,000 in a financial year by individuals and HUFs with ‘no profit and gains of business or profession’ or is within certain specified threshold of sales or gross receipts, there is no TDS obligation. The turnover threshold is set at ₹1 crore in the case of business and at ₹50 lakh in the case of profession.
In other cases, the TDS obligation kicks in if the aggregate consideration for a VDA transaction is more than ₹10,000, explained CBDT in its latest guidelines on section 194S brought out on Wednesday.
The tax deduction is required to be made at the time of credit of such sum to the account to the resident or at the time of payment, whichever is earlier.
If the seller is an exchange and the buyer is any person and the cash sales takes place through an exchange, then the buyer has to deduct taxes. No tax will be deducted if the exchange enters into an agreement with the buyer or broker that the exchange would pay the tax on or before the due date for that quarter, according to an analysis by a research and advisory firm Taxmann.