1% TDS On Crypto To Kick In From July 1 In India. Here's All You Need To Know

On top of the already present hefty 30% taxation on crypto gains which kicked in from 1st April 2022, more pain in store for the cryptocurrency investors in India.

The government will implement the 1% tax deducted at source (TDS) on the transfer or consideration of every trade from July 1, 2022.

FM Nirmala Sitharaman had announced a string of ¡®crypto killer¡¯ announcements during the Budget 2022 speech on February 1st. Besides the 30% crypto tax and 1% TDS, it was also announced that investors cannot set off crypto losses against any other income.

As per ET report, while the crypto industry players see this TDS move as one of the most controversial provisions over the crypto taxations, the government reportedly believes that the new TDS mechanism is used to trace transactions and prevent tax evasion.

shutterstock

For the uninitiated, TDS is a liability enforced against the crypto exchanges that deposit tax on behalf of sellers on the platform. It will be calculated at 1% of the transaction value.

Until now, it is quite unclear how TDS will be calculated and how exchanges will share data with the government. The industry is seeking clarity on two major points, i.e trading and swaps of virtual digital assets (VDA), ET report mentioned.

It was also reported last month that the govt might even levy 28% GST on crypto.

How Will 1% TDS Impact Crypto Investors?

While the crypto investors and industry players wait for more clarity on the soon-approaching TDS implementation, this 1% TDS is expected to mean that investors would lose 1% of their capital on every trade. While any TDS amount above taxes due would ultimately be refunded, it would have a crippling effect on the capital for day traders and short-term investors, as per ET.

The 1% TDS will be deducted from the whole transaction value, irrespective of whether an investor makes a profit or loss.

shutterstock

Also Read: Income Tax Department To Issue Notices To 700 Crypto Investors, Could Levy Penalty, 30% Tax & Interest

Crypto Industry Bats To Either Remove Or Lower The TDS

Crypto businesses, particularly the exchanges, have repeatedly demanded to remove or lower the TDS to 0.01%, which for them is the biggest pain point in the new crypto tax legislation, ET the report stated.

Now it remains to be seen whether the government accepts such demands for lower TDS, given that barely three weeks are left for the proposed 1% TDS to come into effect from July 1st 2022.

Also Read: Crypto Will Collapse One Day, Says Rakesh Jhunjhunwala

For the latest and interesting financial news, keep reading Indiatimes Worth. Click here.