TDS On Crypto: The Simplified Guide
Here are the most asked questions that cover all that you need to know about TDS on Crypto, starting July 1st, 2022:
In the Union Budget 2022, Finance Minister Nirmala Sitharaman introduced a TDS of 1% on payments made for the sale of virtual assets from July 1st, 2022.
Ever since there have been several questions about more details in terms of how this TDS would be deducted, what kind of transactions would this be applicable to, etc.
Our teams have constantly been in touch with TAX experts and regulators over the past few weeks. This guide answers all questions about TDS with respect to using PocketBits.
Before we jump into more, let's just explain TDS in brief for those that might feel a bit lost about what's going on.
TDS stands for "Tax Deducted at Source". The concept of TDS was introduced with the aim to collect tax from the very source of income.
The Finance Bill of 2022 introduced a new section called 194S in the Income-Tax Act, 1961, to levy 1% TDS on any consideration paid for the transfer of Virtual Digital Assets (VDA) aka Crypto.
Also if you feel this might be a little complex, we have some good news for you. We would be dealing with all the complications to make TDS deductions hassle-free for you.
Where applicable, our upgraded systems would deduct the required TDS and the same would be filed with the government on your behalf.
Here are the most asked questions that cover all that you need to know about TDS on Crypto, starting July 1st, 2022:
1. On what actions would TDS be applicable?
TDS of 1% would be deducted on every Sell order starting July 1st, 2022.
Say for example you sell 0.01 BTC at the rate of INR 20 Lakhs, the following would be the break up:
BTC quantity = 0.01 BTC
Rate = INR 20,00,000
Order Value = INR 20,000
Fees on PocketBits = 0
TDS applicable (1% of Order Value) = INR 200
You would receive in your INR Wallet = Order Value - TDS deduction
i.e. INR 20,000 - INR 200 = INR 19,800
2. Would there be no TDS on Buy orders?
Yes, that is correct, TDS would be applicable only on Sell orders and not on Buy orders.
3. Would there be any TDS applicable on INR Deposits and Withdrawals?
No, there are no TDS deductions on INR transfers between your bank and PocketBits.
4. Would there be TDS deductions even if I sell at a Loss?
Yes, TDS of 1% would be deducted on every Sell order starting July 1st, 2022 irrespective of your Profit or Loss.
5. Is TDS deduction compulsory for every user?
Yes, TDS would be deducted on all sell orders for every PocketBits user. It is mandatory as per the new Income Tax laws.
6. Is TDS applicable on Crypto withdrawals?
There will be no deduction of TDS on crypto withdrawals to other wallets.
7. Is TDS applicable on assets in Vault?
No TDS will be deducted on creating a vault, maturity or on the interest received.
8. Is there also a higher TDS rate of 5%? For who would that be applicable?
Yes, 5% TDS would apply to a very small number of users who fall under the below criteria.
As per Section 206AB of the Income-Tax Act, 1961, if any user has not filed their Income Tax Return in the last two years and the amount of TDS is ₹50,000 or more in each of these two previous years, then the tax (TDS) to be deducted for Crypto related transactions will be at 5%.
Contact our Chat support to check if you fall under this section.
9. How would TDS be applied to the Airdropped tokens that I have?
Just like all Sell transactions, TDS would be deducted @1% when you sell your airdropped tokens after July 1st, 2022.
10. What about my trades before July 1st, 2022, would I need to pay TDS on that too?
TDS would not be applicable to Sell orders before the 1st of July 2022. However, you are expected to file your taxes @30% on your profits from April 1st, 2022
11. What are the trade limits above which TDS is applicable?
TDS is applicable on every sell trade from 12 am July 1st, 2022 onwards regardless of value.
12. How do I pay this TDS?
To make the TDS deductions hassle-free and not affect your trade experience with PocketBits our team has upgraded the systems to make the TDS deductions where applicable. Our team will then deposit the TDS on your behalf to the government.
13. Where can I see my TDS deductions?
Users will receive an email for every TDS deduction on their registered emails. Also we have added a new column specifically for TDS in the transactions tab.
14. How can I claim a refund of the TDS?
You can claim the refund of TDS when filing for your yearly Income Tax return (ITR). Please contact your CA/Tax consultant for more details.
As an exchange serving lakhs of users, for consistency and simplicity of implementation, the above-explained approach of TDS on Crypto would be applicable to all users of PocketBits, irrespective of their trading volume during the financial year.