India Clarifies Rules for Controversial Tax Provision Ahead of Start Date

The 1% tax deducted at source for virtual digital assets kicks in on July 1.

AccessTimeIconJun 22, 2022 at 7:29 p.m. UTC
Updated Jun 22, 2022 at 7:49 p.m. UTC

Amitoj Singh is CoinDesk's regulatory reporter covering India. He holds BTC and ETH below CoinDesk's disclosure threshold of $1,000.

India's Finance Ministry has issued guidelines to clarify the reporting mechanism for the contentious and soon-to-be-implemented 1% tax deducted at source (TDS) provision.

CoinDesk earlier reported how India would clarify that provision of its tax code.

The 1% TDS liability – which will take effect on July 1 – is the most controversial provision of India’s recently introduced crypto tax law, with the industry even exploring a legal challenge. Another provision, which enforces a 30% capital gains tax on all crypto transactions, took effect on April 1.

TDS is a liability imposed on the exchanges that deposit taxes on behalf of sellers on their platform. It will be calculated at 1% of a transaction's value. The seller would be able to offset the 1% TDS from his or her total tax liability of 30%.

The government notification also clarified the timeline that parties have to report a virtual digital asset transaction. The government said it must be notified of a transaction within 30 days from the end of the month in which the transaction is made and any sum deducted must be paid to the government within the same time frame.

The format to report the transaction was also specified by the government. A new form will be introduced entitled 26QE, which will play the dual role of a statement and a receipt.

The new rules also say that the person responsible for paying the tax deduction should give a TDS certificate to the payee within 15 days from the due date for reporting it to the government.

The tax would have to be paid beforehand in cases where the payment for the transfer of a digital asset is in kind.

The parties will also have to maintain details like date of transfer of virtual digital assets, value of consideration and mode of consideration.

The latest clarification is said to be a precursor to the Indian Finance Ministry issuing an FAQ on taxation of cryptocurrency in order to provide more clarity.

The government has exempted transactions of up to Rs 50,000 ($640) in a year from the rule of 1% TDS for certain categories of taxpayers.




DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Amitoj Singh is CoinDesk's regulatory reporter covering India. He holds BTC and ETH below CoinDesk's disclosure threshold of $1,000.

CoinDesk - Unknown

Amitoj Singh is CoinDesk's regulatory reporter covering India. He holds BTC and ETH below CoinDesk's disclosure threshold of $1,000.

Trending

1
CoinDesk - Unknown
Morgan Creek Is Trying to Counter FTX’s BlockFi Bailout, Leaked Call Shows

FTX’s $250 million credit facility offer – if inked as initially proposed – stood to effectively wipe out all BlockFi shareholders, including Morgan Creek Digital, the firm told its investors.

CoinDesk - Unknown
3
CoinDesk - Unknown
A New Chapter of Web3: Solana Unveils Smartphone ‘Saga’; Moody’s Downgrades Coinbase

The most valuable crypto stories for Friday, June 24, 2022.

CoinDesk - Unknown
4
CoinDesk - Unknown
How Are Institutions and Companies Investing in Crypto?

From putting bitcoin on their balance sheets to setting up shop in the metaverse, the ways brands and institutions are investing in cryptocurrencies continues to expand.

CoinDesk - Unknown