Government clarifies crypto TDS rules ahead of July 1 start date

The Central Board of Direct Taxes has issued a circular with guidelines that aim to clarify issues relating to tax deducted at source (TDS) at the rate of 1% on transfer of cryptocurrency transactions with effect from July 1.

The Central Board of Direct Taxes (CBDT) has announced clarifications on the tax deducted at source (TDS) for cryptocurrency transactions first announced by Finance Minister Nirmala Sitharaman during the Union Budget in February.

While it has been known that the government plans to charge a 1 percent fee on all transactions starting from July 1, according to a new report by PTI, this charge will now only be applicable if the value of a person's transactions is more than Rs 10,000 in a single financial year.

Additionally, the TDS must be deposited with the tax department within 30 days from the end of the month in which the relevant transaction occurred. Deposit of this tax shall be made with challan-cum-statement Form 26QE.

This form is quite detailed and will require details and proofs of amounts transacted, dates of transactions, and mode of consideration. The latter refers to whether the transaction was between fiat currency and cryptocurrencies, or between two crypto tokens.

The guidelines clarify that the new 30 percent income tax on crypto transactions that was implemented from April 1 onwards will be subject to cess and surcharges as well. This is in line with how the government currently taxes income from speculative sources such as horse racing.

Edited by Teja Lele Desai