The Central Board of Direct Taxes CBDT has released guidelines to clear the air around the TDS on transfers of cryptocurrencies as of July 1 and the Central Board of Direct Taxes CBDT. As per the latest tax laws, anyone purchasing VDA must deduct 1 per cent TDS from the consideration given to the VDA vendor. The guidelines describe how the TDS duty operates in various circumstances, such as when a transaction is made on an exchange, through a broker, or in a VDA to INR or VDA to another VDA transaction.
It is important to note that these guidelines apply only when a transfer of VDA occurs on or through an exchange, with the exception of the rule relating to computing the total consideration paid for the VDA.
The income tax department gave a clarification on the TDS before it came into effect on July 1st, which is good news for the industry as it has been waiting for it.
The clarification on TDS by CBDT is a welcome step to deal with the confusion that exists in the industry. The clarifications fix the applicability and responsibilities for compliance towards TDS deductions, which is a good way forward despite the general apprehension about the taxation structure. We should expect to see more clarifications on VDAs coming up in the future as we move forward with this tax regime.
We continue to believe that the government will consider reducing the TDS percentage to create a healthy and compliant ecosystem.
India's clarification on the tax on digital currency is good news for traders and exchanges. The TDS rule is finally being clarified for investors. As per section 194 s of India's Income Tax Act, exchanges and brokers will have to deduct tax from their users. Taxes must be paid to the income tax department within 30 days of the end of the month in which the deduction was made.
The government's position is clear, which is encouraging people to trade less. The majority of the coin is held by investors and they trade very little. The long-term holding of the trading is not an income source for them.