The FM Nirmala Sitharaman in the previous budget had announced that TDS of 1% would be charged on virtual digital asset (VDA) transfers including cryptocurrencies and NFTs worth over Rs10,000. A VDA has been defined as any information, code, number or token, except Indian or any other foreign currency, that is generated through cryptographic or other means – as per the newly-introduced clause 47 A of the Income Tax Act.
Here’s a guide to help you understand the nuances behind this, and how it affects your usage of crypto:
What happens when I deposit INR?
When you deposit INR to an exchange/platform, you will not be charged TDS
What happens when I buy crypto with INR?
When you buy any VDA with INR, you will not be charged TDS
What happens when I sell crypto?
When you sell VDA and convert to INR, you will be charged a TDS of 1%
What happens when I exchange crypto?
In the case of exchange of VDAs (for eg: Bitcoin being exchanged for USDT on an exchange), 1% TDS will be deducted on both buy and sell transactions.
Will TDS be deducted on losses?
Unfortunately, yes. TDS will be charged on all transactions – irrespective of whether the trades are in profit or loss.
Who deducts the TDS?
- TDS will be deducted by exchanges/intermediaries on your behalf. This can be claimed at the end of the financial year.
- It is the responsibility of the person/entity making the payment to the seller to withhold TDS by deducting it from the sale price and then making the balance payment. This could be a buyer, an exchange or a broker, depending on the transaction in question.
Limits on TDS?
- TDS will be deducted on above transactions only on transactions above Rs10,000.
- In case TDS is being paid by a specific person, TDS will be deducted only when total or aggregate value of the VDA exceeds Rs50,000 during the financial year 2022-23.
What about International Exchanges/Platform or Decentralized exchanges?
At present, TDS will be deducted only for transactions on Indian exchanges, platforms and when the transaction in question is taking place in India.
The rules are unclear for international exchanges/platforms and dex.
How does this affect your usage of GoSats?
- There will not be any tax deductions on the sats you earn via GoSats
- When you withdraw your stacked sats and convert to INR, 1% TDS will be deducted on transactions above Rs10,000.
We hope this clears any confusion you may have had around the topic. If you have any further questions, please drop a comment below or reach out to us at firstname.lastname@example.org.