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What are the issues clarified by CBDT’s new guidelines on 1% TDS for digital assets?

India’s central tax authority issues guidelines to clear up confusion over the application of 1% TDS on crypto assets from July 1, 2022.

The Central Board of Direct Taxes (CBDT) has issued guidelines to clear up confusion over the one percent tax deducted at source (TDS) on transfer of a virtual digital asset (VDA) on exchanges. The measure was announced as part of the crypto tax regime announced in the Budget 2022-23 and comes into effect on July 1, 2022. Why it matters: The tax regime was welcomed by the crypto industry stakeholders which saw the announcement as a sign of the government's open attitude towards crypto assets. The rate of taxation however, along with the one percent TDS, left a bitter taste as the industry argued that it was prohibitive and would complicate the smooth functioning of business. What is the basis for the TDS: The Indian government added a new section (194S) in the Income-tax Act, 1961, through the Finance Act 2022. When should tax be deducted: The deduction must be done at the time of payment or at the time of credit of sum (paid to acquire a VDA) to the account of the seller, whichever is earlier. When can deduction be avoided: One does not have to deduct the TDS in the following scenarios— Sum to acquire a VDA is payable by a specified person and the value of such sum does not exceed Rs.50,000 during the financial year; Consideration is payable by any person other than a specified person and the value of such consideration does not exceed Rs.10,000 during the financial year. A specified person has been defined…

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I cover several beats such as Crypto, Telecom, and OTT at MediaNama. I can be found loitering at my local theatre when I am off work consuming movies by the dozen.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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