India’s central tax authority issued clear guidelines regarding the applicable 1% TDS framework on particular crypto transactions.
In the Union Budget 2022, Nirmala Sitharaman, finance minister of India, announced 30% tax & 1% TDS on every profit generated on crypto transactions. But at that time the majority of things were unclear.
Later some experts & government officials provided some details regarding the ITR filing procedure to file crypto tax. But 1% of TDS decisions & guidelines were suspended til July of this year.
Just a couple of days ago, India’s central tax authority issued detailed guidelines regarding the 1% TDS system, which applies to crypto transactions.
According to the published guidelines, crypto traders will be required to pay 1% extra trade fee during the sale of the crypto assets. 1% TDS will be deduced by the exchange itself. But it will apply to crypto-fiat trade pairs.
If any person will try to trade the crypto-crypto pair then in that situation crypto traders will be required to pay 1%+1% TDS, which means 2% TDS.
However, this 1% TDS system is still not good for the frequent Crypto traders but still, the Indian crypto community blindly accepted this issued order and also will be forced to pay by 1 July 2022. And all these things will happen via an automatic system introduced by all the local Indian crypto exchanges.
Under the issued order, all the crypto exchanges will be required to transfer the deducted TDS fund to the government within 30 days.
Possible action against the TDS system
Under the 1% TDS system, a crypto trader will lose around 100% of his total initial capital fund under less than 100 trades, so basically it will degrade the interest of the crypto traders to go with crypto trading.
According to reports, all the crypto companies will file a petition against this TDS system and may urge to reduce this 1% TDS system to 0.1% or even less because it is necessary for the evolution of this crypto industry.
Few experts noted that such a 1% TDS system will motivate and act as a catalyst to force the crypto traders to go with decentralized crypto exchanges like Trust wallet. In some particular situations, it will force the crypto traders to deal under the P2P system, which will further result in the crypto black market.