There are plenty of rules and new TDS guidelines for new crypto tax especially on TDS ( Tax Deducted at Source ) in India. Well, CryptoSharX explained all the essential points on Crypto tax in India already, make sure to check them out here. Let’s now Decode what actually are new TDS Guidelines to look at before they officially start applicable to all your crypto transactions from starting of 1st July this year.
India is going to add a 1% TDS tax to the Flat 30% tax it already charges on crypto transactions. When a certain income, such as a salary, commission, rent, interest payment, or professional fee, is made, a certain amount, known as TDS or Tax Deducted at Source, is collected.
Let’s look into frequently asked questions and meanwhile understand TDS Guidelines more accurately and straightforward ever before.
FAQs on TDS Guidelines
1. Would 1% TDS be deducted if users deposit money into the exchange?
NO. TDS will not be deducted when users deposit money into the exchange.
2. How will TDS be deducted on Crypto – INR pairs? For Crypto – INR pairs, no TDS will be deducted on buying crypto
However, when users sell their crypto for ₹ INR, 1% of the total transaction amount will be deducted as TDS
3. How will TDS be deducted on Crypto – Crypto pairs?
1% TDS will be deducted on both buy & sell transactions. For example, if you exchange USDT for BTC, then, 1% TDS will be deducted on the sale of USDT & 1% TDS will also be deducted again when you sell that BTC.
4. How will TDS be deducted on Dex & international exchanges?
The guidelines for TDS are only applicable to Indian exchanges as of now. TDS deductions are not yet applicable for international exchanges or dex.
5. Who will deduct the TDS?
In most cases, the Indian exchanges themselves will deduct the TDS on behalf of users. This TDS can be claimed back at the end of the financial year.
6. Will TDS be deducted in case users sell their crypto at a loss too?
Yes. TDS will be deducted irrespective of profit or loss generated by the users
TDS Guidelines Explained:
TDS rules will take effect on July 1, 2022. These rules won’t affect any trades that are made before July 1, 2022. According to these rules, TDS would be taken out of every trade in which a cryptocurrency asset is traded for INR or another cryptocurrency asset.
TDS wouldn’t be taken out of the buyer’s INR when they bought cryptocurrency, but the seller would have to pay TDS. When a Crypto asset is bought with another Crypto asset, or when one Crypto asset is traded for another, the TDS is paid by both parties.
Where it is needed, 1 percent TDS will be taken out of the INR or Crypto amount that is due. But according to Section 206AB of the Income-Tax Act, 1961, if the user hasn’t filed an Income Tax Return in the last two years and the TDS was 50,000 or more in each of those two years, then the TDS for crypto-related transactions will be 5%. For the rest of this article, we will use 1% as the TDS rate to keep things simple.
The Income Tax Department needs to be paid INR for the TDS that was collected. For this, any TDS collected in the form of Crypto needs to be changed into INR. In Crypto-to-Crypto transactions, the TDS for both sides would be taken out of the quote (or primary) Crypto asset to make it easier to convert and reduce price slippage. The quote assets on WazirX markets are INR, USDT, and BTC. For example, in the MATIC-BTC, ETH-BTC, and ADA-BTC markets, BTC is the quote Crypto asset, so both the buyer and seller’s TDS would be taken out in BTC Examples:
INR markets: 1 BTC sold for 10 INR, and the person selling the BTC gets 9 INR (after 1 percent TDS deduction). The buyer of 1 BTC gets 1 BTC (no TDS deducted).
Markets for crypto-crypto: 1 BTC sold for 10 ETH. By paying 1.01 BTC, a BTC seller gets 10 ETH (after 1 percent TDS addition). The buyer of 1 BTC gets 0.99 BTC (after 1 percent TDS deduction).
In P2P trading. Before putting in an order to sell USDT, 1% TDS would be taken out. The person who buys USDT P2P doesn’t have to pay any TDS. Examples:
Seller places an order for selling 100 USDT. After 1 percent of TDS is taken out, a sell order for 99 USDT would be made. The buyer would pay 99 USDT, and the buyer would send the same amount of INR to the seller’s bank account.
If all 99 USDT don’t sell, 1 percent TDS would only be taken out of the amount that did sell, and the remaining 1 USDT locked for TDS would be given back to the seller when the order is cancelled.
The TDS will be figured out based on the “net” amount payable, which is the amount left over after GST/charges made by the Exchange are taken out.
Any TDS that was paid in Crypto would be converted into INR on a regular basis, and the INR amount would be added to the trades.
To make things clearer, the TDS that was taken out would be listed on the order details page right after the trade was made. When TDS is taken out in the form of any crypto asset, the INR value of the TDS taken out can be found in the trading report after 48 hours.
Please take note that the TDS requirements will be in effect if you submit orders before July 1, 2022, but the trade occurs on or after that date.
The Bottom Line
That was informative article for you all guys to understand TDS Guidelines which are going to be applicale full fledged just after few days. No doubt, it has a lot of terms and rules to follow but nothing else then following we could do as a indian citizen.
Ready to lock your 1% of every transaction you do on crypto from 1st of July?
Read more about Crypto tax and TDS guidelines here: