TDS on Crypto Coins: WazirX, Other Trading Platforms Implement New Rules, Check Out the Changes

Aset of new rules regarding taxations of cryptocurrencies and Virtual Digital Assets have already come into effect from July 1 under which the buyer of a VDA has to pay 1 per cent tax deducted at source (TDS) of the amount paid to the seller. The cryptocurrency TDS rule has come into effect as the Finance Act, 2022, inserted a new section 194S in the Act.

“The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1 per cent of such sum as income tax thereon. The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier,” said the Central Board of Direct Taxed in a notice dated June 22.

Read More: GDP: Crisil cuts FY23 growth estimate to 7.3%

Companies Start to Implement TDS Rules

Cryptocurrency exchanges had already started implementing the new TDS rules on crypto, days before it came into effect. The requirements have been implemented on the crypto exchange website, as per the companies.

“Set processes are in place to collect TDS for relevant transactions. First, the TDS collected needs to be paid to the Income Tax Department in INR. For this, any TDS collected in the form of Crypto has to be converted to INR. For ease of conversion and to reduce price slippage, in Crypto to Crypto transactions, the TDS for both sides would be deducted in the quote (or primary) Crypto asset,” said Rajagopal Menon, vice president at crypto trading platform WazirX.

“WazirX markets have four quote assets- INR, USDT, BTC, and WRX. For example, in the following markets: MATIC-BTC, ETH-BTC, and ADA-BTC, BTC is the quote Crypto asset, and hence the TDS of both the buyer and seller trading in these markets would be deducted in BTC,” he added.

Read More: UPI transactions remain above Rs 10 lakh crore in June for second month in a row: NPCI data

“We have already been working towards implementing things on the TDS front, so there won’t be any significant changes with the newly issued CBDT FAQ. Moreover, TDS is refundable on loss-making transactions,” said Edul Patel, CEO and co-founder at Mudrex, a cryptocurrency investment platform.

What Crypto Exchanges Say About the New Rules

The new updated rules had already went live on WazirX platform on June 30. “We are complying with the government’s directive on 1 per cent TDS and the updates on our exchange and P2P platforms went live yesterday. The new update will ensure that tax deductions are transparent to keep users informed of taxation throughout the crypto buying experience,” Menon said.

Talking about the TDS rule on cryptocurrencies, Patel added, “The only thorn in the taxation is that it cannot offset crypto losses against the gains. But, hopefully, the government will address those in the coming years with more use cases of crypto coming into the market.”

Source :
Click to comment

Leave a Reply

Your email address will not be published.

Most Popular

To Top