The 1 percent tax deducted at source (TDS) on virtual digital assets (VDAs) and cryptocurrencies went into effect on Friday as the Reserve Bank of India (RBI) hardens its stance on cryptocurrencies. According to Section 194S of the I-T Act, 1 percent TDS shall be applied on payments for virtual digital assets or cryptocurrencies that exceed Rs 10,000 per year (as per the Finance Act, 2022).
On June 21, the Central Board of Direct Taxes (CBDT) announced changes to the I-T Rules regarding the submission of TDS reports in Forms 26QE and 16E. The new section mandates a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA), to deduct an amount equal to 1 per cent of such sum as income tax thereon.
The tax deduction is required to be made at the time of credit of such sum to the account of the resident or at the time of payment, whichever is earlier. The TDS on virtual coins come as the RBI Governor Shaktikanta Das said on Thursday that cryptocurrencies are a clear danger to the financial systems. CBDT has notified that the TDS collected under Section 194S should be deposited within one month from the end of the month in which the deduction has been made.
Rajagopal Menon, Vice President at leading crypto-exchange WazirX said that they are complying with the government's directions on 1 per cent TDS and "the updates on our exchange and P2P platforms went live yesterday".