Cryptocurrencies are like digital money that people can buy and sell. The Indian government has made some rules about how people should pay taxes on cryptocurrencies. As of 2022, if someone sells their cryptocurrencies and makes a profit, they have to pay taxes on that profit. There's also a new rule where the person who buys the cryptocurrencies has to take a small part of the money they pay (one percent TDS) and give it to the government as TDS (Tax Deducted at Source). This rule can be confusing for people who buy and sell cryptocurrencies directly with each other via P2P (Peer-to-Peer) without any exchange. The new section for TDS - 194S is effective from July 1, 2022.
Section 194S requires a person, who is responsible for paying to any resident any sum by way of consideration for transfer of a virtual digital asset (VDA) / Crypto / Crypto Currency / USDT / etc, to deduct an amount equal to 1% of such sum as income tax thereon. VDA covers all cryptocurrencies such as USDT, Bitcoin, Ethereum, BNB, Shibu Inu, Solana, and Dogecoin, etc that are being traded on P2P (Peer-to-Peer) Platforms.
Table of Contents
- How It's Done
- What is a TDS return?
- What is Section 194S for TDS on Cryptocurrency?
- When TDS under section 194S would not be applicable?
- Who is Specified persons for under section 194S
- What is a VDA?
- When to deduct TDS u/s 194S for TDS on Cryptocurrency?
- When to deposit TDS under Section 194S? What is the due date for it?
- Free Sample of TDS filings done by us
Our Process - How It's Done
- Speak with our TDS tax specialist about your case details
- Provide basic details such as PAN Card, Name, etc
- We will need the number of transactions and amount
- Provide details of crypto seller such as Name, PAN number etc. If you don't have these details then also let us know.
- Send us the documents via WhatsApp or email
- Our Tax expert will prepare the TDS forms and share the draft for your review
- You approve the draft and we will the File TDS on your behalf
- We will then share the copy of Filed TDS return with you
What is a TDS return?
A deductor has to deposit the deducted TDS to the government and the details of the same have to be filed in the form of a TDS return. A TDS return has to be filed quarterly. Different types of TDS deductions have to be filed using different TDS return forms.
What is Section 194S for TDS on Cryptocurrency?
The Indian Government has introduced a new provision called Section 194S under Budget 2022, which mandates the deduction of TDS at a rate of 1% on the transfer of cryptocurrency and other Virtual Digital Assets (VDAs) if the aggregate value exceeds INR 10,000 during the financial year. This provision is effective from 1st July 2022 and not 1st April 2022.
Additionally, Budget 2022 has also introduced Section 115BBH, which imposes a tax of 30% on income generated from cryptocurrency, NFT, and VDA. Crypto traders cannot claim any expenses or set off or carry forward any losses, and Chapter VI-A deductions cannot be claimed against such income.
When TDS under section 194S would not be applicable?
TDS under 194S would NOT be applicable in the following cases:
1. Where the consideration is payable by a specified person and the value or aggregate value of such consideration does not exceed 50,000 rupees during the financial year.
2. Where the consideration is payable by any person other than a specified person and the value or aggregate value of such consideration does not exceed 10,000 rupees during the financial year.
3. It is also mentioned that once TDS has been deducted by the person making payment, the payment gateway through which the person is making payment is not required to deduct tax under 194S. No double deduction of TDS.
4. No TDS when a person deposits or withdraws money from his account with the exchange.
Who is Specified persons for under section 194S
Specified persons are individuals or HUFs who meet either of the following criteria:
- They have no income from business or profession
- They have a business income of up to INR 1 crore or a professional income of up to INR 50 lakhs.
What is a VDA?
A Virtual Digital Asset (VDA) is a digital representation of value, which can be traded or transferred digitally and is used as a medium of exchange, unit of account, or store of value. In simple terms, a VDA is a type of digital asset that is similar to cryptocurrency but has a broader scope and can include digital tokens, coins, or any other form of digital representation of value. The Indian government has introduced Section 194S, which mandates the deduction of TDS on the transfer of VDAs along with cryptocurrencies.
When to deduct TDS u/s 194S for TDS on Cryptocurrency?
According to Section 194S, TDS should be deducted on the transfer of Virtual Digital Assets (VDAs), including cryptocurrencies, if the aggregate amount during the financial year exceeds INR 10,000, except in the case of specified persons, where the threshold limit is INR 50,000. The deductor should only deduct TDS if the payee is a resident of India.
When to deposit TDS under Section 194S? What is the due date for it?
|Description||When to deposit TDS|
|If the amount is credited in the month of March|
|If the amount is credited in a month other than March||Within 7 days from the end of the month in which deduction is made|
Free Sample of TDS filings done by us
TDS Filing Sample 2
TDS Filing Sample 3