The government will clarify the tax on virtual digital assets this week; employers may have to pay a 30% tax on VDAs they offer to staff

New Delhi: The government is set to issue detailed clarifications regarding the Virtual Digital Asset (VDA) tax this week. Additionally, employers will have to pay a 30% tax on the cryptocurrencies they offer their employees as compensation or otherwise.

Quoting people familiar with the matter, HEY indicated that the tax will be levied on the difference between the acquisition cost of the VDA and the transfer price to the employee. The transfer price will be deemed to be the acquisition cost for the employees.

“Standards are being developed… These will be published soon,” a government official told the financial daily. Additionally, credit card rewards points and e-vouchers will not be treated as ARVs. The clarification can clearly define the rules for determining the cost of acquiring VDAs.

The Center is considering a few models, including the first-in, first-out method followed for demat titles, the weighted average, or the last-first-out format to know the cost of acquisition.

The explanation could also clarify the withholding tax (TDS) payment schedule. “The clarification would address some of the concerns raised by the industry,” said another official quoted by the daily.

It is worth mentioning here that in the 2022-23 budget, Finance Minister Nirmala Sitharaman announced a crypto tax that will subject income from crypto-related transactions to a tax rate of 30%. The budget also proposed a 1% TDS on payments to virtual currencies in excess of Rs 10,000 per year and taxation of such gifts in the hands of the recipient.

The crypto industry wants the tax to be payable no later than the TDS payment due date.

Sudhir Kapadia, Country Tax Manager, EY, told the Daily: “Regarding the 1% TDS on in-kind or exchange consideration on the transfer of VDA, it is not technologically possible to secure payment. of tax before the release of the consideration because such an exchange occurs instantaneously. . It should be clarified that the tax can be paid according to the normal due dates for TDS payments.

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