The Central Board of Direct Taxes said on Tuesday (28-06-2022) that both the buyer and the seller would be required to withhold taxes on transactions involving the exchange of one virtual asset for another.
In a new set of clarifications, the CBDT stated that in a peer-to-peer transaction of virtual digital assets, the buyer will be required to deduct tax in accordance with section 194S of the I-T Act (VDA).
Therefore, the buyer (i.e., the person paying the consideration) is obligated to deduct tax under section 194S of the Act in a peer-to-peer transaction (i.e., a buyer to a seller without going via an Exchange), according to the CBDT.
Concerning the obligation to withhold tax at source under Section 194S of the Act when the consideration is in kind or in exchange for VDA, the CBDT stated that in this case, the person responsible for paying the consideration must ensure that the tax required to be withheld has been paid in respect of such consideration before releasing the consideration.
“In order for VDAs to be transferred, both parties must pay tax with regard to the transfer and provide others with proof. Then, both of them would have to submit this in the TDS statement along with the challan number “explained the CBDT.
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