New Delhi: The income tax department announced on Tuesday that for transactions involving the exchange of one virtual asset for another, taxes must be withheld by both the buyer and the seller.
The Central Board of Direct Taxes (CBDT) further clarified that in a peer-to-peer exchange of virtual digital assets, the buyer must deduct tax in accordance with section 194S of the I-T Act (VDA). Accordingly, in a peer-to-peer transaction (i.e., a buyer to seller without using an exchange), the buyer (i.e., the person providing the consideration) is required to withhold tax in accordance with section 194S of the Act, 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 exchange for VDA, the CBDT indicated 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.
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