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TDS Function on crypto, other virtual digital assets from July 1




According to the Central Board of Direct Taxation (CBDT), the country's decision to charge a 1 percent tax deduction at source (TDS) on cryptocurrency has been clarified by the agency. For many in the business, there was misunderstanding over when and how to charge the tax, which takes effect on July 1. Almost immediately after the government declared a 30% tax on crypto transactions in February of this year, the tax was disclosed.


In terms of virtual digital assets, what is the legislation on TDS?

Purchasers of digital assets must now deduct 1 percent of the price paid to the seller (an Indian resident) as income tax deducted at source from the price of the digital assets (TDS). The tax must be subtracted from the amount credited or paid to the resident individual, whichever comes first. A tax deduction will only be made in cases where the amount paid exceeds the predetermined threshold.


VDA transfer tax will be 20% if the deductee (buyer) does not have a PAN number. Tax Deducted at Source (TDS) will be deducted at the higher rate of 5 percent (rather than the standard rate of 1 percent) when an individual has not submitted his/her income tax return.


When will TDS on VDA, crypto be implemented?

To be subject to TDS on a VDA, crypto transfer, the'specified person' (buyer) must pay an amount greater than Rs 50,000 (on a single or aggregate basis), per the CBDT circular, or any other person/buyer (other than that'specified person' mentioned above) must pay an amount greater than Rs 10,000 during the financial year to be subject to TDS on that transfer.


"Specified person" is defined as:

As long as the entire sales/gross receipts/turnover from a company or profession does not exceed Rs 1 crore or in the case of a profession does not exceed Rs 50 lakh, both individuals and Hindu Undivided Families (HUFs) are exempt from tax. This threshold is visible in the financial year immediately preceding the financial year in which VDA has been transferred.

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