Income Tax On Digital, Virtual Assets Was Dropped To 0.01%, But It Was An Error!
In her fiscal budget for FY23 in early February 2022, Finance Minister Nirmala Sitharaman stated that a 30% tax excluding TDS (tax deducted at source) will be imposed on digital assets’ transactions in the country.
The move has been highly criticized by the cryptocurrency industry, and after much complaints, the government has retain the TDS on Virtual Digital Assets or VDAs at 1%.
On Wednesday, the Income Tax department’s portal had flashed the TDS rate for VDAs down to 0.1%, however, there was probably an error and after rectification, the rate reflected (as before) at 1%.
Income Tax India mentioned on Twitter, “Some media reports have come to the notice of CBDT claiming that the rate of TDS on Virtual Digital Assets(VDA) has been reduced to 0.1%.
It is hereby clarified that there is no change in the rate of TDS on VDA, which continues to be 1%.”
Crypto Investors on 1% TDS on Virtual Digital Assets
For a moment on June 8, the Income Tax department’s portal reflected the TDS on VDAs as 0.1%, down from 1% announced earlier.
This vested immense relief in cryptocurrency traders in the country.
However, their enthusiasm remained short lived, as the department changed it back to 1%.
Many cryptocurrency platforms and investors took the issue to various social media platforms and discussed it.
The IT portal also added that no tax shall be imposed if the aggregate value is lesser than Rs 10,000 during the fiscal, and remains under Rs 50,000 during the financial year, a development already known and nothing new.
A TDS of 1% imposed on cryptocurrency transactions will come under effect from July 1, 2022, and it has been one of the major reasons for a massive drop in volumes on Indian crypto exchanges over the past few months, amid an ongoing crypto crash.
According to Moneycontrol data, transaction volumes fell by 55% and domain traffic declined about 40% on top crypto exchanges in Indian the first two days after the crypto tax came into effect.
At present, the drop is over 90%, according to market experts.