Cryptocurrencies have become increasingly popular over the years, & their widespread adoption has led to the emergence of new challenges for governments around the world. India has been grappling with the issue of how to regulate the use of cryptocurrencies for a while now. Recently, the government has hinted that it may consider levying TDS/TCS on cryptocurrency trading. In this article, we will explore what TDS/TCS is, why the government is considering it, & what it means for cryptocurrency traders.
What is TDS/TCS?
Tax Deducted at Source (TDS) & Tax Collected at Source (TCS) are two mechanisms used by the Indian government to collect taxes. TDS is a tax that is deducted from the income earned by an individual or an entity at the time of payment, whereas TCS is collected by the seller at the time of sale!
Why is the government considering TDS/TCS on cryptocurrency trading?
The Indian government has been concerned about the lack of regulation surrounding cryptocurrencies for some time. Cryptocurrencies are not yet recognized as legal tender in India, but they are not banned either! This has led to ambiguity & confusion around the taxation of cryptocurrencies. With the rise of cryptocurrency trading in India, the government is considering levying TDS/TCS to ensure that taxes are paid on income earned from trading cryptocurrencies!
The impact of TDS/TCS on cryptocurrency traders
If TDS/TCS is levied on cryptocurrency trading, it will have a significant impact on cryptocurrency traders. They will have to comply with the regulations & pay taxes on the income earned from trading cryptocurrencies. Failure to comply with the regulations can result in penalties & fines.
Ways to comply with TDS/TCS regulations
To comply with TDS/TCS regulations, cryptocurrency traders will have to maintain accurate records of their transactions & income earned from trading cryptocurrencies. They will also have to file their tax returns on time and pay the taxes due. Cryptocurrency traders may also have to register themselves as a business entity & obtain a Tax Identification Number (TIN).
The way forward for cryptocurrency regulation in India
The Indian government has been working on a framework to regulate cryptocurrencies for some time now. In 2019, a draft bill called the “Banning of Cryptocurrency & Regulation of Official Digital Currency Bill” was proposed, which sought to ban all private cryptocurrencies in India. However, this bill has not been passed yet. In March 2021, the Supreme Court of India overturned a ban on banks dealing with cryptocurrency exchanges, which was imposed by the Reserve Bank of India (RBI) in 2018. This has given a boost to the cryptocurrency industry in India! The government is now considering regulating cryptocurrencies rather than banning them altogether!
Conclusion
The Indian government is considering levying TDS & TCS on cryptocurrency trading to ensure that taxes are paid on income earned from trading cryptocurrencies! This move is likely to have a significant impact on cryptocurrency traders, who will have to comply with the regulations and pay taxes on their income! Cryptocurrency regulation in India is still in its early stages, but it is clear that the government is taking steps to address the challenges posed by cryptocurrencies!
