June 25, 2022

The Central Board of Direct Taxes (CBDT) on June 22 issued detailed guidelines on the tax deducted at source (TDS) rule for virtual digital assets (VDAs) such as cryptocurrencies, and laid down the various scenarios under which tax would be applicable and on whom the onus of deduction would lie.


  • The Finance Act, 2022 introduced Section 194S in The Income Tax Act, 1961, under which a TDS of 1 per cent will be levied on the transfer of VDAs effective July 1 if the value of transactions exceeds Rs 10,000 in a year.
  • In cases where the transfer of VDA takes place on or through an exchange, and the VDA being transferred is not owned by the exchange, tax may be deducted by the exchange making the payment to the seller.
  • However, when the payment between the seller and the exchange is being done through a broker, the responsibility to deduct tax shall be on both the exchange and the broker.
  • The CBDT has defined four primary VDAs — bitcoin, ether, USD Tether, and USD Coin — for the purpose of tax deduction on lesser known cryptocurrencies.