According to the latest guidelines issued by the Income Tax Department, Government of India, 1% TDS will be enforced from July 1. The Finance Ministry has already regulated a 30% tax on the net profit gained by selling crypto assets. From April 1, 2022, this tax was regulated across all centralized crypto exchange platforms in the country.
Yesterday, the Income Tax department released a set of guidelines for the removal of difficulties under sub-section (6) of section 194S of the Income-tax Act, 1961. The new sections are added in the 194S section and will come into effect by July 1st, 2022.
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It is equally important to educate oneself before thinking in a biased way. Below are some of the simple yet important questions that have been answered and clarified. Before you start to panic about so many taxes and deductions, here are some of the questions answered with respect to the new guidelines.
Will 1% TDS be applicable when depositing money on the crypto exchange platform?
Answer: NO, the TDS will not be deducted when users and investors deposit money on the exchange.
Does Crypto-INR pair will be affected because of this TDS?
Answer: The crypto-INR pair will not be affected due to TDS regulations. But, if users will sell crypto for INR, they have to pay 1% TDS of the total transaction.
TDS deductions on Crypto-crypto pair transactions?
Answer: The Income Tax Department has implied 1% TDS deduction on both buying and selling the crypto-crypto pairs through exchanges. For instance, exchanging USDT for BTC will attract a 1% TDS on the sale of USDT. Also, if users try to sell BTC afterward, it will again attract a 1% TDS deduction.
Is the new guideline applicable for decentralized crypto exchanges (DEX) and international exchange platforms?
Answer: NO, currently the issued guidelines speak for Indian centralized crypto exchange platforms. As of now, no TDS is applicable on DEX and international exchanges
How will the deduction take place?
Answer: In the first place, the exchange platform itself will deduct the 1% TDS on behalf of the users. These TDS can be claimed at the end of the financial year.
If any user faces losses, will he/she have to bear the 1% TDS?
Answer: Unfortunately, YES. TDS is deducted by the Income-tax department irrespective of profits and losses. So you have to make sure when to pull out your money.
Is the 1% TDS applicable on transfer value above Rs 50,000 and Rs 10,000?
Answer: According to Section 194S, if the aggregated value of the considerations is greater than Rs 50,000, then the TDS liability is applicable to the person in that financial year. Similarly, for others, the limit has been specified as Rs 10,000.