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A set of new tax rules Cryptocurrency The virtual digital assets came into effect from July 1, with the buyer of a VDA having to pay a 1 percent tax deducted at source (TDS) from the amount paid to the seller. The TDS Cryptocurrency Base It came into effect as the Finance Act, 2022, introduced a new Section 194S into the law.
“The new section obligates any person, who is responsible for paying any amount to any resident by way of a Virtual Digital Asset Transfer (VDA) consideration, to deduct an amount equal to 1 percent of that amount as income tax on it,” the Central Board of Direct Taxes said in a notice dated June 22. The tax deduction is required at the time this amount is credited to the resident’s account or at the time of payment, whichever comes first.
Companies start implementing TDS rules
Crypto exchanges have already started implementing the new TDS rules on cryptocurrencies, days before they come into effect. The requirements have been implemented on the cryptocurrency exchange website, according to the companies.
“The process set is in place to collect TDS for related transactions. First, the tax refunds collected must be paid to the Income Tax Department in Indian Rupees. For this, any TDS collected in the form of Crypto must be converted into INR. Rajagopal said. Menon, Vice President of Cryptocurrency Trading Platform WazirX, for ease of conversion and reduced price slippage, in Crypto-to-Crypto transactions, TDS will be deducted for both sides of the crypto (or base) assets.
WazirX Markets has four pricing assets – INR, USDT, BTC, and WRX. For example, in the following markets: MATIC-BTC, ETH-BTC, and ADA-BTC, BTC is a Crypto asset, so TDS will be deducted for both buyers and sellers trading in these markets with BTC,” added.
“We have already worked on getting things done on the TDS front, so there won’t be any significant changes with the newly issued CBDT FAQ. Moreover, TDS is recoverable on losing trades,” said Edul Patel, CEO and Co-Founder at Mudrex. It is a cryptocurrency investment platform.
What do crypto exchanges say about the new rules
The new updated rules were already published on the WazirX platform on June 30. “We are adhering to the government’s 1% TDS directive, and updates to our exchange and P2P platforms were released yesterday. The new update will ensure that tax deductions are transparent to keep users informed of taxes throughout their crypto purchase experience,” Menon said.
Speaking about the TDS rule on cryptocurrencies, Patel added, “The only thorn in taxation is that crypto losses cannot be offset against gains. But, hopefully, the government will deal with these in the coming years with more use cases of cryptocurrencies entering the market.” .
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