The sale and/or transfer of virtual digital assets—VDA, or Crypto in common parlance—will be subject to TDS, or tax deducted at source, at the rate of 1% effective from 1st July 2022. We break down the process to help you better understand nitty-gritties on the official circular released on 22nd June 2022.
TDS is an advance tax to establish a transaction trail, deducted at the time of trade execution, and can be adjusted against your total tax liability at the time of filing your annual income tax returns.
Tell me more, please?
TDS is applicable on sell transactions. The trading platform you use will deduct this amount and remit it to the tax authorities on your behalf. TDS will not be applicable on buy transactions in most cases.
Meaning: If you buy Crypto, say BTC, on CoinSwitch, TDS is not applicable in most cases. When you sell your holdings on CoinSwitch, 1% TDS will be deducted from the total order value. The amount will be remitted to the tax authorities on your behalf.
Are there any exceptions?
As per the Finance Act 2022, your transactions will not be subject to TDS if your total trade value doesn’t exceed ₹10,000 in the said financial year (2022-23).
Further, in rare cases when the Crypto you are purchasing is illiquid in India, CoinSwitch will facilitate your order through a Crypto-to-Crypto transaction made on your behalf. A 1% TDS deduction will be applicable in this case. Your transaction invoice will transparently provide the break up of such deductions.
How can we Help?
To ensure transparency, CoinSwitch will provide you with the following documentation:
- Transaction note/Tax invoice with the breakup of TDS and fees
- Quarterly Form 16A certificate for better tax management
Note: The invoice gets generated within 48 hours from trade execution.
How will the 1% be deducted? Example
Still got doubts? Here is a quick example for you to understand:
Imagine you need to sell 10 tokens (Name the entity as A)
The sell price of each token currently stands at ₹20 (Entity B)
Commission and service charge at CoinSwitch, including discount, exchange fee, and GST (Entity D) , say ₹1
Total token sale value = A x B: 10 x ₹20 = ₹200 (Entity C)
Net Sale = C – D = ₹200 – ₹1 = ₹199
TDS applicable on the token sale sum (i.e. 1% of ₹199, or ₹1.99) (Entity E)
The final sum that would reflect in your CoinSwitch account = C – D – E = 200-1-1.99 = ₹197.01
Will TDS be deducted when I transfer money to my bank account?
Once you initiate a sell transaction on our platform, the (C-D-E) value will be the one that gets credited to your CoinSwitch wallet. There are no additional taxes when you withdraw the same into your registered bank account.
Is there a tax document detailing TDS deductions?
Your Form 26AS will detail all the TDS deductions made on your behalf. You can adjust the deductions against your total tax liability while filing your annual income tax returns.
Q1. Is there a TDS Cap?
A1. A TDS of 1% will be applicable on all your transactions if your annual aggregate trade value crosses the ₹10,000 limit. Sell transactions henceforth (be it ₹100 or ₹10,000,000) will be subject to 1% TDS.
Q2. What happens if my income doesn’t fall in any tax bracket?
A2. TDS will still be deducted, irrespective of the income tax basic exemptions. However, you can claim a refund if your total tax liability is zero or lower than what you have already paid in the form of TDS while filing your annual income tax returns.
Q3. How is TDS different from the 30% tax?
A3. TDS is meant to establish a money trail. You can adjust this against your total tax liability for the year. The 30% tax is payable on profit on the sale of VDA.
Q4. What about the VDAs I receive through coupons?
A4. TDS will not be applicable when you redeem a coupon to receive Cryptos. It will be applicable when you sell those.
Still got doubts? Here are a few additional questions and their answers that might help.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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