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India’s crypto exchanges cheer the clarification issued on new tax rules

India’s crypto exchanges cheer the clarification issued on new tax rules thumbnail

The Indian government has brought in some much-needed clarity—and cheer—in the matter of taxing digital token transactions.

The union budget for 2022-23 had declared a 30% tax on income from cryptocurrencies from the new financial year and a 1% TDS on all crypto transactions starting July 1. This had left the industry under a cloud, shrinking trade volumes.

On June 22, however, the central board of direct taxes (CBDT) clarified (pdf) how firms could comply with the revised tax.

What are the new tax rules?

“Investors can now plan their trades with clarity…believe that the government will monitor the implementation and consider reducing the TDS percentage to create a healthy and compliant ecosystem,” Vikram Subburaj, CEO of crypto platform Giottus, said.

Exchanges will have to deduct tax from the crypto buyer’s side in a transaction, according to the new rules. This tax must be paid to the centre within 30 days of the end of the month during which the deduction was made.

Users who claim a refund on their taxes from the government must show a TDS certificate issued to the payee within 15 days from the due date of reporting the tax, the government has clarified.

While TDS on loss-making transactions is refundable, the inability to offset crypto losses against gains remains a sticking point, said Edul Patel, co-founder of Mudrex, another crypto exchange.

Payment for the transfer of cryptos done in kind or in exchange for another digital asset also attracts TDS, adding to the total, the circular said. CBDT is likely to issue a frequently asked questions document to clear any further confusion.

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