The day for India to start changing a 1% tax-deductible at source (TDS) on crypto transactions is inching nearer. To subside any confusion among Indian crypto investors, the country’s Central Board of Direct Taxes has clarified.
This will also be followed up by a Frequently Asked Question (FAQ) document, which will soon be released. Per the guidelines, cryptocurrency traders in India will have to pay a 1% TDS on every cryptocurrency transaction they make.
Applicable from July 1, the TDS was introduced in the Union Budget 2022-23, under a new section, 194S, in the Income-tax Act, 1961.
The government had earlier stressed that the TDS motive is to track crypto transactions for security purposes. However, a lack of information regarding the same has caused chaos within India’s crypto market.
When the transaction takes place on an exchange, the platform will be responsible for charging the 1% TDS. Moreover, these taxes must be paid to the central government within 30 days from the end of the month in which the deduction was made.
As for payments made in kind, the Indian Government has stressed that sellers will have to show proof to the buyers that the TDS has already been paid.
The Indian Government has also issued new reporting guidelines. Investors will have to fill out the yet-to-be-introduced 26QE form, which will be used as both a statement and receipt.
Although, the seller can offset the 1% TDS from their total 30% tax liability.