TDS rules for cryptocurrency | Fusion - WeRIndia

The Ministry of Finance proposed collecting tax on virtual digital assets or cryptocurrencies from July 1, 2022, in the Union Budget.

In this context, it issued a circular on the tax deducted at source (TDS) on June 22. It clarified the TDS rules on the transfer of virtual digital assets (VDAs) or cryptocurrencies.

Here are a few details on TDS rules:

The Ministry of Finance announced the tax on VDAs in the Union Budget 2022-23. A new section, 194S, has been introduced for this.

Union Finance Minister Nirmala Sitharaman said that VDAs would be taxed at 30 per cent. Besides, a TDS of 1 per cent will be applied on the transfer of these assets.

If the VDA is transferred through an exchange, it is the responsibility of the exchange to deduct the TDS while transferring the payment to the seller.

If the seller transfers the VDA through a broker who is using the exchange, in such a case, it is the responsibility of both the broker and exchange to deduct the TDS. But, if they have a written agreement stating that the broker will be responsible for the deduction of TDS, only the broker will be responsible for it.

On other hand, if the exchange owns the VDA and transfers it, then the buyer should deduct the TDS. However, it is difficult for the buyer to know whether the exchange owns the VDA or not. Hence, the exchange can enter into a written agreement with the buyer assuring of paying the tax to the government.

The TDS amount will be deducted on a net basis but not on a gross basis. That means the tax will be deducted after excluding the GST or commission.

After the deduction of TDS on the VDA as per the prescribed guidelines, no tax will be deducted by the payment gateway if the transfer of the VDA is done through the platform.

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