TDS on crypto: All you need to know
By: Team Giottus
From July 1, 2022, a 1% TDS (Tax Deducted at Source) will be imposed on all crypto transactions in India. The TDS will be applicable on sale of crypto assets on the transaction amount (and not on the profits made). Crypto exchanges like Giottus play a key role in enabling hassle-free transactions for customers as the TDS regime kicks in. Giottus, in line with its stated principles, is trying to ensure that the taxation is hassle-free for customers. As this is a new process, Giottus customers (you) will have a lot of queries. Here, we try to answer some of the common questions and break down the scenarios for you:
- What is 1% TDS?
TDS is the tax deducted at the source and paid to the government on behalf of the deductee. This is not additional tax, but this more like an advance that you are paying for your final tax amount. This will be adjusted when the individual files a return at the end of the financial year. On crypto assets, exchanges will deduct TDS on behalf of buyers on their platform.
2. How is TDS calculated?
It will be calculated at 1% of a transaction’s value. The seller would be able to offset this 1% TDS from his or her total tax liability when he files for tax returns.
3. How will TDS be deducted on Crypto-INR pairs?
TDS will be deducted on selling a crypto asset to INR. On every sell order, 1% of the total transaction amount will be deducted as TDS. Giottus will deduct this amount and deposit it with IT dept on the seller’s account. A TDS certificate will also be issued in due course.
4. How will TDS be deducted on Crypto-Crypto pairs?
In crypto-crypto pairs, both parties are considered as sellers of a crypto asset. So, a 1% TDS will be deducted on both sides. For example, in case there is a trade on BTC/USDT pair where 0.1 BTC is sold for 2000 USDT, both parties will have to pay 1% TDS on the crypto they will receive. In this case, from Buyer 0.001 BTC (1% of 0.1 BTC) and 20 USDT (1% of 2000 USDT) will be deducted as TDS. The crypto that is deducted as TDS will be liquidated to INR at the end of day and this INR realized amount will be paid as TDS to the government. Giottus will be taking care of all the TDS operations mentioned above for trades executed in Giottus.
5. Would 1% TDS be deducted if users deposit/withdraw money (INR) to/from an exchange?
No TDS will be deducted in both cases.
If you deposit INR, there will be no TDS.
If you withdraw INR, there will be no TDS.
If you deposit crypto, there will be no TDS.
If you withdraw crypto, there will be no TDS.
If you buy crypto with INR there will be no TDS.
TDS applies only to a seller when there is a trade.
6. How should an investor (you) navigate this asset class?
We believe that crypto assets are still lucrative for long-term investors who minimize the number of trades. You can keep buying crypto with INR in regular intervals (TDS or capital gains tax does not apply in this scenario). When you are in profit and convert your crypto asset to INR again, you will have to pay TDS and offset it later in the year when you file your tax returns. Giottus will continue to offer easy (and free) ways to deposit INR into the platform so we recommend all our users to use INR pairs extensively.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.