The Income Tax (I-T) Department has come out with detailed disclosure requirements for tax deduction at source (TDS) for virtual digital assets (VDA), under which date of transfer and mode of payment will have to be specified.

From July 1, a TDS of 1 per cent will be levied on payments towards VDAs or cryptocurrencies beyond Rs 10,000 in a year as the Finance Act, 2022, has introduced Section 194S in the I-T Act.

In the run-up to implementation of the new provision, the Central Board of Direct Taxes (CBDT) on June 21 notified certain amendments in I-T Rules with respect to furnishing TDS returns in Form 26QE and Form 16E.

The CBDT has notified that the TDS collected under Section 194S shall be deposited within 30 days from the end of the month in which the deduction has been made. Deposit of tax so deducted shall be made in the challan-cum-statement Form 26QE.

Nangia Andersen Partner Neeraj Agarwala has said that to furnish Form 26QE, the specified persons would be required to maintain details, like date of transfer of VDAs, value of consideration, mode of consideration – whether cash or kind or in exchange of another VDA etc.

The Union Budget of 2022-23 has brought in clarity with regard to levy of Income Tax on crypto assets. From April 1, 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 Rs 10,000 towards virtual currencies has also been introduced, which will kick in from July 1. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals or Hindu Undivided Families (HUFs), who are required to get their accounts audited under the I-T Act.