Developing Time for India
TDS from July 1 on digital asset transfer
The Finance Act 2022 introduced Section 194S in The Income Tax Act, 1961, which will levy a TDS of 1 percent on the transfer of VDAs, if the value of the transactions exceeds Rs 10,000 in a year.
On Wednesday (June 22), the Central Board of Direct Taxes (CBDT) released detailed guidelines on the tax deducted at source (TDS) rule for virtual digital assets (VDAs), such as cryptocurrencies. It explained various scenarios under which tax would be applicable and who would be responsible for the deduction.
According to Section 194S of The Income Tax Act, 1961, a TDS of 1 percent will be levied on the transfer of VDAs if the value of the transaction exceeds Rs 10,000 in a year under the Finance Act 2022.
The Tax Department has defined its guidelines’ responsibilities for deducting taxes in various scenarios.
If the transfer of VDA takes place on or through an exchange, and the VDA being transferred is not owned by the business, then tax may be deducted by the deal making the payment to the seller.
Nevertheless, when the seller and the exchange payment are handled through a broker, the tax should be deducted by both the business and the broker.
If a transfer of VDA takes place on or through an exchange, and the conversation owns the VDA being transferred, it is the buyer or his broker’s responsibility to deduct tax.
Alternatively, the exchange may enter into a written agreement with the buyer or his broker that, regarding all such transactions, the business would pay the tax on or before the due date for that quarter.
In general, this applies to situations where the transfer of a VDA is made against money. The tax department has also provided examples of cases where transferring one VDA occurs in exchange for another VDA.
If two different cryptocurrencies – say, bitcoin and ether – are exchanged, both the buyer and seller are considered involved. The transfer of cryptocurrency will therefore be subject to taxation for both parties.
The guidelines also allow exchanges that facilitate such transactions to deduct tax in these instances.
When VDA is transferred for consideration in kind, or partly in cash and partly in kind, through an exchange, the business may deduct tax. The alternative approach can be used based on written agreements between the exchange and the buyers/sellers. Exchanges would be required to deduct tax on both ends of the transaction (buyers and sellers) and report it as such.
Currently, the CBDT has defined four primary virtual currency assets – bitcoin, ether, USD Tether, and USD Coin – for the purpose of the tax deduction on lesser-known cryptocurrencies.
In the case of trading Monero for Deso…the exchange shall execute a market order for converting this tax deducted in kind (1% Monero/1% Deso in the above example) to one of the primary VDAs (BT, ETH, USDT, USDC), which can be easily converted to INR. In this way, tax deducted under Section 194S of the Act in the form of non-primary VDAs like Deso/Monero will be converted into primary VDAs which have a ready market in INR,” it said.
According to Amit Maheshwari, Partner at AKM Global Tax, “Generalizing, the responsibility to deduct TDS has been placed on the exchanges, which will increase the compliance burden on them… The exchanges have to further disclose these transactions in their tax return and maintain a proper tax trail for them.”. However, this would benefit both buyers and sellers since they can enter into contracts with the exchange for passing the responsibility to deduct tax on their behalf in VDA to VDA transfers or otherwise.”.
“If the buyer acquires VDA through an exchange and makes payment to the exchange, the exchange will deduct TDS while making payment to the owner of the VDA or the broker of the VDA owner, or the exchange itself can pay taxes on such a transaction if the buyer enters into a written agreement with the exchange.”
Where one VDA is exchanged through another VDA, the exchange will deduct TDS @1% from both parties since, in this case, both parties are buying another VDA instead of transferring the VDA owned by them. Therefore, the clarification provided by CBDT will ease out much of the compliance on the part of the buyer. However, the buyer will be required to adhere to this provision if he acquires the VDA directly from the owner or broker without involvement from the exchange.”
Neeraj Agarwala, the Partner, Nangia Andersen LLP, said: “Overall, the CBDT has resolved several open issues that were being debated in the professional circles.” However, several of the recommendations made by the CBDT, especially regarding the documents to be maintained between the parties to the transaction, such as agreements, challans, and undertakings, may not be feasible to implement and hence may render several redundant clarifications issued under this circular.”
IAF begins the selection: Agnipath Scheme
The registration window for the recruitment process in the Indian Air Force under the Agnipath scheme opened on Friday, nearly a week after violent protests rocked several states.
The registration window for #Agniveervayu will open at 10 am today, the IAF announced on Twitter.
On June 14, the government of India unveiled the Agnipath scheme, which will allow the youth aging from 17 and a half to 21 years will be eligible to join this four year tenure, and from that, 25 percent of candidates will be selected for regular service as well after the end of the tenure.
After this scheme was passed by the government, in many parts of the nation, people witnessed violent protests against the Indian government from the people who were against the scheme. Many different people from the opposition party and some military experts also slammed the Agnipath Scheme. According to them, this scheme will have an adverse effect on the operational capabilities of the Indian armed forces.
Later on June 16, the government of India increased the upper age limit of the Agnipath Scheme to 23 years, which was earlier 21 years for the present year.
Apart from that, the candidates who will be recruited under the Agnipath scheme will be known as ‘Agniveer.’ Also, the army has said that this scheme will make sure to build the youthful profile of the defense system and will also result in a reduction of the average age of the Indian soldiers that is around 32 years to 26 years which has remained constant over a period.
All the three chiefs are in strong support of the Agnipath scheme after it was announced after two years of deliberation.
While talking about the income, all the Agniveers will receive the salary of thirty thousand whereas they will get twenty-one thousand in hand and remaining nine thousand will go as the corpus amount and later in the second, third and fourth year, the salary will be thirty-three thousand, thirty-six thousand five hundred and forty thousand respectively.
After the tenure is over, every Agniveer will get the amount of eleven lakh seventy-one thousand as the Seva Nidhi Package, and it also has the exemption from income tax.
In the tenure of 4 years, one has to go through the training period, which will last around two and half months to six months maximum.
edited and proofread by nikita sharma
