Income Tax Department issues disclosure requirements related to crypto

The Income Tax Department has informed the disclosure requirements regarding TDS deduction for Virtual Digital Assets (VDA). In this, the date of transfer and mode of payment will have to be mentioned. From next month, tax deducted at source (TDS) of 1 per cent will be levied on VDA or cryptocurrencies for payments exceeding Rs 10,000 in a year. For this provision was made in this year’s Finance Act.

Ahead of the implementation of the new provision, the Central Board of Direct Taxes (CBDT) has notified certain amendments to the Income Tax rules relating to filing of TDS returns in Form 26QE and Form 16E. It states that the TDS collected has to be deposited within 30 days from the end of the month in which it is deducted. Neeraj Agarwala, Partner, Nangia Andersen LLP said that in order to submit Form 26QE, individuals belonging to a particular category have to provide details such as the date of transfer of VDA, its value, mode of payment or exchange for any other VDA.

The central government says that it is not considering giving any exemption in TDS of 1 percent on transfer of virtual digital assets. People associated with the crypto industry had raised the demand for exemption in TDS. Finance Minister Nirmala Sitharaman had said that no hasty decision will be taken regarding the law related to crypto. The Reserve Bank of India (RBI) last year asked for a ban on cryptocurrencies. The government says that it will not ban this segment completely. A law for effective tax administration of Virtual Digital Assets (VDA) is likely to be enacted soon. The Central Board of Direct Taxes (CBDT) has been entrusted with the responsibility of making guidelines for VDAs. This will also clarify the definition of VDA. The Finance Ministry did not provide further details about the crypto tax reforms.

CBDC can be launched in the country in this financial year. This will enable people to get more payment options. Work is underway to launch a CBDC in many other countries. Its trial has been started in some countries. RBI has said that CBDC will be linked to the existing monetary policy as well as payment systems.

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