The 1 per cent tax deducted at source (TDS) on virtual digital assets (VDAs) and cryptocurrencies is another chaos in India’s crypto space.
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Three Cryptocurrency exchanges -- ZebPay, WazirX and CoinDCX -- suffered declines of between 60% and 87% in the value of daily trading immediately after the 1% tax-deductible at source became effective on July 1, as compared to previous three-day periods in late June.
The TDS rule states that all trades involving the sale and transfer of crypto assets will be charged a 1 percent fee on the seller's end. The 1% TDS rule, which was proposed earlier this year in Budget 2022, has been introduced through a new section 194S in the Income-tax Act.
The government introduced a tax regime for digital assets in February, consisting of the TDS and a flat 30% tax on income from crypto investments. It also banned offsetting of losses on such assets, treating them differently from stocks and bonds.