Taxes should be levied on cryptocurrencies and digital assets. On July 1st, the new laws will come into effect.

New Delhi: The Central Board of Direct Taxes (CBDT) has clarified the tax to be levied on the transfer of virtual digital assets. The move comes after a move to impose TDS on digital assets from July 1.

TDS will be levied if the value of digital asset transactions exceeds Rs 50,000 per annum. The crypto transaction is at a loss but will be taxed at one per cent. Assuming a loss in one transaction, it adjusts to another transaction

TDS on Crypto in India: Income Tax Requirements for Transactions Using Cryptocurrencies Expounded

This page discusses the updated Income Tax Circular, Guidelines, Frequently Asked Questions, and Rules that will be in effect for bitcoin transactions starting on July 1.

TDS on Cryptocurrency Transactions in India: Today, the Central Board of Direct Taxes (CBDT) released guidelines to address any concerns with the new Section 194S, which will go into effect on July 1st, 2022.

The Finance Act of 2022 included Section 194S to the Income Tax Act. On the transfer of virtual currencies and other digital assets, it requires a 1 percent TDS deduction. Here are some of the most crucial clarifications from the circular that are presented in a Q A manner in an effort to assist Indian buyers and sellers of cryptocurrencies:

When sending cryptocurrency through an exchange, who will deduct TDS?

The circular states that in this situation, the exchange must deduct TDS.

"Only the exchange that is crediting or making a payment to the seller (the owner of the VDA being transferred) is permitted to deduct tax under Section 194S of the Act, according to the circular.

"When the broker owns the VDA, the broker is the seller in such situation." Therefore, under section 194S of the Act, the amount of consideration that the exchange credits or pays to the broker is likewise eligible for a tax deduction "It was ad.

When moving cryptocurrency on an exchange through a broker who is not the seller, who will deduct TDS?

According to the circular, both the exchange and the broker are responsible for withholding tax under Section 194S of the Act where the credit or payment between the exchange and the seller is made through a broker (and the broker is not the seller).

The circular stated, "However, the broker alone may deduct the tax under section 194S of the Act provided there is a written agreement between the Exchange and the broker that the broker shall be deducting tax on such credit or payment.

However, the exchange would be obliged to submit a quarterly statement (in Form No. 26QF) on or before the deadline provided in the Income-tax Rules, 1962, for each of these transactions made during the quarter.

When transferring cryptocurrency through an exchange that is also the asset's owner, who will deduct TDS?

The buyer will be required to subtract the TDS in this scenario. The buyer could not, however, be aware of the ownership status of the asset, depending on the circumstances. As an alternative, the circular stated that "Exchange may enter into a written agreement with the buyer or his broker that with regard to all such transactions, the Exchange would be paying the tax on or before the due date for that quarter." This was done to clear up any ambiguity in such situations.

"For all such transactions during the quarter, the Exchange would be obliged to submit a quarterly statement (in Form No. 26QF) on or before the deadline outlined in the Income-tax Rules, 1962. The Exchange would also have to submit its income tax return, and that return would have to detail all of these transactions "The circular further added.

CBDT issues Circular No. 13/2022 dt 22.06.22 containing guidelines to remove difficulties wrt Section 194S, which comes into effect from 01.07.22. Section 194S mandates tax deduction @ 1% on transfer of Virtual Digital Asset by payer.
It is available on:https://t.co/NMNcgKzkOU

— Income Tax India (@IncomeTaxIndia) June 22, 2022

How does TDS work when exchanging one cryptocurrency for another?

The circular states that both parties will be buyers and sellers whenever a person transfers a cryptocurrency asset to another person in return for another cryptocurrency. Both parties in this situation will be required to pay the tax and provide documentation for the exchange of virtual digital assets.

"Both parties are the buyer and the seller in a circumstance where VDA "A" and VDA "B" are being traded. The first is a buyer for "A" and a seller for "B," and the second is a buyer for "B" and a seller for "A." In order for VDAs to be exchanged, both parties must pay tax with respect to the transfer of VDAs and provide each other with proof "The notice said.

"The TDS statement would then need to include this information together with the challan number. This year, requirements for reporting such transactions were included to Form No. 26Q. Form No. 26QE has been introduced for specific individuals "It was ad.

If cryptocurrency is exchanged for another cryptocurrency through a cryptocurrency exchange, the exchange itself may alternatively withhold tax in accordance with a written arrangement with the buyers/sellers.

Can TDS be deducted from crypto transfers via payment gateways?

If payment is made using a payment gateway, there may be occasions where tax is deducted twice. The circular stated that in the aforementioned example, the payment gateway will not be required to deduct tax under section 194S of the Act on a transaction if the tax has already been deducted by the person ('XYZ') required to make deduction under section 194S of the Act in order to remove the difficulty in such cases.

Will the TDS rule only be in effect for cryptocurrency transfers worth more than Rs 50,000 or Rs 10,000?

According to Section 194S, the obligation to deduct tax only arises when the value or aggregate of the consideration for the transfer of VDA during the financial year exceeds Rs 50,000 in the event of consideration paid by a defined person and Rs 10,000 in all other circumstances.

The circular explained how this limit of Rs 50,000 or Rs 10,000 will be calculated, stating that "calculation of consideration for transfer of VDA triggering deduction under section 194S of the Act shall be counted from 1st April 2022" since the threshold of Rs 50,000 (or Rs 10,000) is with respect to the financial year.

It continued, "Therefore, the provisions of section 194S of the Act shall apply on any sum, representing consideration for transfer of VDA, credited or paid on or after 1st July 2022, if the value or aggregate value of the consideration for transfer of VDA payable by a person exceeds fifty thousand rupees (or ten thousand rupees) during the financial year 2022–23 (including the period up to 30th June 2022)."

No TDS is applied to amounts credited or paid before July 1, 2022.