A month after the crypto industry urged the government to reduce the TDS on payments towards gains arising from trading in cryptocurrencies to 0.1 percent, the official website of Income Tax was silently updated with a great news for crypto exchanges. Much to the surprise of crypto traders, TDS on virtual digital transactions had been slashed from 1 percent to just 0.1 percent, as per the website.
The crypto industry was of the opinion that 1 percent TDS would cause severe harm to the growth of the industry as it would lock up capital for traders and drain liquidity from the market, which will cause retail investors to suffer. The change on the IT portal on Wednesday certainly came as a relief to many. But it was only a short-lived fantasy.
Error on website
The Budget 2022 had proposed 1 percent TDS on payments towards virtual currencies beyond Rs 10,000 in a year with a threshold limit for TDS would be Rs 50,000 a year for specified persons. This provision was to come into effect from July 1, 2022. Right before the deadline, the TDS was slashed, at least that's what the IT portal mentioned.
But as the change made headlines, the Income Tax portal updated its document on Tax Deduction as Source (TDS), upholding the 1 percent TDS on virtual digital assets. The website had earlier mentioned 0.1 percent in error, and it was rectified soon after.
In the short while the error was on the website, many welcomed the news, but there were others who suspected it to be an error.
The website also mentioned that no tax will be applicable, if the aggregate value does not exceed Rs. 10,000 during the financial year and does not exceed Rs. 50,000 during the financial year, which remains unchanged. But as per the budget, the 1 percent TDS will be applicable starting July 1.
