Virtual digital assets (VDAs), including cryptocurrencies, attract 1 per cent of tax deducted at source (TDS). It was introduced in the last year’s Finance Bill 2022 and became effective from July 1, 2022. Since then, the government has collected direct taxes of Rs 157.9 crore by way of tax deducted at source on VDAs.
Finance Minister Nirmala Sitharaman in the Union Budget 2022 had introduced the provision of tax deducted at source at 1 per cent levied on payments made on transfer of virtual assets. It also announced a levy of 30 per cent on virtual assets, including cryptocurrency and non-fungible tokens or NFTs.
According to a CBDT notification, “The new section (Section 194S) mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1 per cent of such sum as income tax thereon. The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier."
Union Minister of State for Finance Pankaj Chaudhary in a written reply to a question in Rajya Sabha on Tuesday said the direct tax collected by way of tax deducted at source under Section 194S of the Income-tax Act, 1961, on payments made upon transfer of virtual digital assets (VDA), aggregates to Rs 157.9 crore up to March 20, 2023, for FY 2022-23.
The minister stated that crypto assets are currently unregulated in the country. However, transactions in cryptocurrencies are subjected to provisions of various laws like the Prevention of Money Laundering Act, 2002, and Income Tax Act, 1961.
The minister further stated that the Financial Stability Board states in its Consultative Document titled ‘Regulation, Supervision and Oversight of Crypto-Asset Activities and Markets’, dated October 11, 2022, that investment and activity in the crypto asset market is largely self-contained and is mostly for speculative purposes with limited connections to the real economy.
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