The new forms such as 26QE require detailed information for payments on transfer of virtual digital assets such as the date of transfer of VDA to amount paid/credited either in cash or kind or in exchange of another VDA. This will help the tax department to trace the virtual digital asset transactions
For TDS deductions for virtual digital assets, the income tax department has come out with detailed disclosure requirements, under which the date of transfer and mode of payment will have to be specified.
As the Finance Act 2022 has introduced Section 194S in the I-T Act, from 01 July, tax deducted at source (TDS) of one per cent will be levied on payments towards virtual digital assets or crypto-currencies beyond INR 10,000 in a year.
With respect to furnishing TDS returns in Form 26QE and Form 16E, the Central Board of Direct Taxes (CBDT), in the run up to implementation of the new provision, notified certain amendments in I-T Rules on 21 June.
CBDT has notified that from the end of the month, the TDS collected under Section 194S shall be deposited within 30 days in which the deduction has been made. In the challan-cum-statement Form 26QE, the deposit of tax so deducted shall be made.
Nangia Andersen LLP Partner Neeraj Agarwala said to furnish Form 26QE, the specified persons would be required to maintain details like date of transfer of virtual digital assets (VDAs), value of consideration, mode of consideration — whether cash or kind or in exchange of another virtual digital asset etc.
“These forms are in line with the recently introduced provisions of Section 194S. Complying with these sections, the forms require detailed disclosures.”
“The specified persons should be well-equipped to understand and obtain the information required for compliance, as well as maintain the appropriate documentation to support these transactions,” Agarwala said.
AKM Global Tax Partner Amit Maheshwari said that there was a greater need to have clarity on the procedural compliances since only a few days are left for the new TDS provisions like Section 194R and 194S to come into play.
“The new forms such as 26QE require detailed information for payments on transfer of virtual digital assets such as the date of transfer of VDA to amount paid/credited either in cash or kind or in exchange of another VDA. This will help the tax department to trace the virtual digital asset transactions,” Maheshwari said.
But it will also increase the compliance burden on taxpayers, he added.
To give nuanced clarifications on applicability of income tax on virtual digital assets, the finance ministry is also working on an FAQ on taxation of crypto-currency.
With regard to levy of income tax on crypto assets, the 2022-23 Budget has brought in clarity. From 01 April, a 30 per cent I-T plus cess and surcharges, is levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions.
A 1 per cent TDS on payments over INR 10,000 towards virtual currencies has also been introduced which will kick in from 01 July. The threshold limit for TDS would be INR 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.
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