Crypto Tax: Who Will Pay 1% TDS From 1st July

The Central Board of Direct Taxes (CBDT) has recently issued guidelines specifying who will be responsible for deducting TDS in various types of transactions.

Crypto trading in India is going to be difficult from next month. The 1% TDS rule and crypto tax for cryptocurrency and Virtual Digital Assets (VDA) transactions will be effective from July 1, 2022.

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

The Central Board of Direct Taxes (CBDT) has recently issued guidelines specifying who will be responsible for deducting TDS in various types of transactions.

As per CBDT’s circular number 13 of 2022, the crypto buyer will have to deduct TDS in case of peer-to-peer transactions. If the transaction takes place on or through the exchange, the exchange can deduct TDS.

“In certain cases where the transaction takes place on an exchange, but payment to the seller is made through a broker, in that case, both the exchange and the broker are required to deduct TDS, however, by virtue of the written agreement, the broker may only TDS can be deducted on the seller,” Gopal Bohra, partner, NA Shah Associates told FE Online.

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He further said that any person, whether a buyer or an exchange or a broker, as the case may be, who has deducted TDS while making payment to the seller of VDA, shall have to deposit the tax within 30 days from the end of the month in which the tax is paid. is cut.

“For example, tax deducted under section 194S in the month of July shall be deposited on or before August 30,” Bohra said.

The crypto tax will be submitted online in Form No. 26QE which is the challan-cum-statement of tax deducted under section 194S. For this purpose, TAN of the deductor is not required. However, if the deductor has TAN, he can fill the form in Form 26Q

Further, the deductor has to issue TDS certificate to the deductor in Form 16E within 15 days from the due date of furnishing of challan-cum-statement in Form No. 26QE after it is downloaded from the Income Tax Portal.

Tax Effect of TDS Rule

Experts say that the 1% TDS rule will not result in any additional tax expense in the hands of the seller as it will be adjusted against his regular annual tax liability.

There will be no TDS compliance burden on the buyer if he buys Crypto VDA through the exchange.

“However, there will be no additional tax outgo in the hands of the crypto seller on account of 1% TDS as it will be adjusted against his regular annual tax liability. However, it will certainly help the government to trace crypto transactions and any tax leakage. Also, there will be no TDS compliance on the crypto buyer if he is buying through an exchange, as in such a case TDS will be deducted by the exchange and it will reduce his TDS compliance burden,” Bohra said.