Crypto tax explained: What are non-VDAs; How TDS going to levied on crypto

Gift cards, vouchers, mileage points, reward points, and loyalty cards are not VDAs, will be excluded from crypto tax, says CBDT

VDAs crypto tax

As announced in the budget for 2022-23, transactions involving cryptocurrencies or virtual digital assets (VDAs) would be subject to a 30 per cent tax and a 1 per cent tax deducted at source (TDS). Following that, the Central Board of Direct Taxes (CBDT) has issued detailed disclosure requirements for TDS deductions for VDAs, including the date of transfer and mode of payment.

TDS of 1 per cent will be levied on payments to VDAs or cryptocurrencies exceeding Rs 10,000 per year beginning July 1, as Section 194S of the I-T Act was added by the Finance Act of 2022.

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In addition, the CBDT announced in a statement that gift cards, vouchers, mileage points, reward points, and loyalty cards will be excluded from the definition of VDAs. As a result, these products will be exempt from any tax imposed on VDAs, cryptos, and non-fungible tokens (NFTs).

The CBDT stated that the exemption will include gift cards or vouchers that can be used to obtain goods or services at a discount on goods, mileage points, reward points, or loyalty cards issued as part of an award, and any reward, benefit, loyalty, incentive, rebate, or promotional programme that can be used or redeemed to obtain goods or services at a discount on goods.

However, in preparation for the new provision’s implementation, the CBDT notified certain amendments to the I-T Rules on June 21 regarding the submission of TDS returns in Forms 26QE and 16E.

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.

Furthermore, the finance ministry has been working on providing a FAQ on cryptocurrency taxation, so that the crypto enthusiast can get a clarification on the applicability of the taxes on VDAs or cryptocurrencies.

Also Read: GST Council mulling 28% tax on Bitcoin, other cryptocurrencies

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 includes individuals/HUFs who are required to get their accounts audited under the I-T Act.