Govt. of India Will Cut TDS on All Crypto Transactions from 1st July 2022


The union budget for 2022-23 had announced
a 1% TDS on all crypto transactions starting July 1 and a 30% tax on income
from cryptocurrencies from the next financial year.
On June 22, India's FinanceMinistry Nirmala Sitharaman has given guidelines to explain the detailing mechanism
for the contentious and soon-to-be-implemented 1% tax deducted at source (TDS)
provision.
According to the new rules, exchanges
will have to deduct tax from the crypto buyer’s side in a transaction. This tax
must be paid to the exchange in the span of 30 days of the month's end during
which the deduction was made.
The notification issued by the government
also clarified the timeline that parties need to report a virtual digital asset
(VDA) transaction. The government also specified the format to report the
transaction. A new form will be released titled 26QE to play the dual role of a
statement and a receipt.
Clients who claim a refund on
their taxes from the government ought to show a TDS certificate issued to the
payee within 15 days from the due date of reporting the tax, the government has
explained.
The tax would have to be paid in
advance in situations where the payment for the transfer of a digital asset is
in kind.
The individuals will also have to
keep up with details like the date of transfer of VDA, the value of consideration, and mode of
consideration.
Earlier, the industry
stakeholders have made several requests to the government to bring down the TDS
rate from 1% to 0.01% or 0.05%, yet without much any result. This had left the
industry in dark, shrinking trade volumes.
Until the Central Board of Direct
Taxes (CBDT), on Wednesday, gave clarification on how firms could follow the
revised tax. The recent move has brought back a ray of hope that the government
may come up with more such clarifications, as opposed to the chance of a
complete ban earlier.
“Investors can now plan their
trades with clarity…believe that the government will monitor the implementation
and consider reducing the TDS percentage to create a healthy and compliant
ecosystem,” Vikram Subburaj, CEO of crypto platform Giottus, said.
In case the transactions are
proved to be loss making, TDS will be refunded but the inability to offset
crypto losses against gains will remain the same, according to Edul Patel,
co-founder of Mudrex.
Payment for the cryptos’ transfer
done in kind or exchange for another digital asset also draws in TDS, adding to
the total, the circular said.
On the other hand, the government
has excluded transactions of up to Rs 50,000 ($640) in a year from the rule of
1% TDS for specific categories of taxpayers.
Whether the TDS provision applies
to foreign crypto trading platforms isn’t clear at this point. CBDT is likely
to issue a FAQ document to clear any further confusion.

Joyashree Dey
CBW - External Analyst
INDIA