Attention crypto investors! New tax will be imposed on your transactions from July 1, know full details

The crypto market, which is going through a period of uncertainty, will have to face the new tax in India from July 1. The central government had introduced 30 percent tax rate in the budget 2022-23. Now from July 1, TDS at one percent will be levied on payment of digital assets or cryptocurrencies of more than Rs 10,000 in a year. The TDS deduction will be applicable on all Virtual Digital Asset (VDA) transfers, including cryptocurrencies and Non Fungible Tokens (NFTs). Remember that TDS will be levied on the cost of more than 10 thousand rupees. In the new clause 47A of the Income Tax Act, VDA has been defined as any information, code, number or token. This includes cryptocurrencies and non-fungible tokens.

According to the report, Finance Minister Nirmala Sitharaman had announced a 1 percent TDS deduction in the budget 2022-23. In between, there was some ambiguity about it. On June 22, the IT department made it clear that there will be 1 percent TDS on virtual digital assets. Those investors who are not making profit from cryptocurrencies will also have to pay tax.

The Central Board of Direct Taxes (CBDT) has clarified that the responsibility of withholding TDS will lie with the person making the payment to the seller, that is, he can be a buyer of an exchange or a broker. This means that TDS will be deducted from the selling price and after deducting TDS, the remaining amount will be transferred to the seller.

In such transactions in which the buyer and seller are directly involved, the buyer will be required to take tax deduction under section 194S of the IT Act.

In case of transfer of VDA through a broker or exchange, the deductibility of tax will be done by the exchange. In cases where the broker is involved but is not a seller, the onus of deducting tax will lie on both the broker and the exchange.

Significantly, the Indian crypto market is going through a tough phase due to all the uncertainties and new rules. According to reports, many big names of India’s crypto industry are laying off their employees. Most Indian businesses are trying to tread cautiously as they prepare for the new tax rates to be introduced for the sector. Trading volume on WazirX, one of India’s fastest growing cryptocurrency exchanges, has fallen by 95 per cent since October last year due to new tax regulations. Recently, Wald has also shown the way out to 30 percent of the employees. It is estimated that in the month of June alone, 1700 people have been out of this industry.

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