As per the circular issued by the Central Board of Direct Taxes on June 22, 2022, TDS of 1% will be applicable on all sales/transfers of Virtual Digital Assets (“VDA”) including Crypto assets and NFTs effective July 1, 2022. As per the new law, the buyer of VDA is required to deduct 1% of the amount paid to the seller towards Tax Deducted at Source (“TDS”). This requirement has been introduced vide Section 194(S) of the Income Tax Act (the “Act”).
The tax is required to be deducted at the time of credit of the amount or at the time of payment. The liability to deduct tax under Section 194(S) of the Act applies only when the value or aggregate value of the consideration for transfer of VDA exceeds Rs 50,000 during the financial year in case of consideration being paid by a specified person and Rs 10,000 in other cases.
ZebPay will deduct this 1% of TDS at the time of execution of the trade and transfer of the crypto assets from July 1, 2022. The TDS will be then paid to the Government on behalf of the buyer. You can adjust this against your tax liabilities at the time of filing an income tax return.
Please refer to this link for more information on Section - 194S, Income-tax Act, which mentions the taxation rules on Virtual Digital Assets. There is also a blog we have published on our website related to TDS.
Frequently Asked Questions:
What Is TDS and How Much Is Deducted?
Tax Deduction at Source (TDS) is an advance tax collected at source and paid to the Government by the source, in our case, ZebPay. This is collected by the Government to establish the trail of every transaction.
As per the new Section - 194S, Income-tax Act, 1% TDS will be applicable on the sale/transfer of Virtual Digital Assets (Crypto assets / NFTs) from July 1, 2022.
Eg:- Your order information will appear as follows if you make a Sell order for 1 BTC at INR 20,00,000:
Order value = INR 20,00,000
Transaction fees* (0.5% of 20,00,000) = INR 10,000
TDS applicable (1% of 19,90,000) = INR 19,000
Final Calculation (Actual withdrawal amount) = INR 20,00,000- (10,000+19,000)= 1,971,000
** Please note Transaction fees may vary depending on the tier you belong to
Is TDS Mandatory?
Yes, it is mandatory as per the new Income Tax Regulations.
How Is It Different From a 30% Tax on Capital Gains?
TDS is an advance tax and this can be adjusted against your total tax liability. Users are liable to pay 30% tax, applicable surcharge, and cess at the time of filing yearly IT returns.
When and How Often Is TDS Deducted?
TDS is applicable on every sale or transfer of VDA. ZebPay will apply TDS on every such executed order/transfer starting from July 1, 2022.
Why Am I Charged 5% TDS Instead of 1%?
If an individual is a specified person u/s 206AB i.e. he/she has not filed his/her income tax returns for the last 2 financial years, then TDS will be deducted at a higher rate of 5% for the current financial year (instead of a normal rate of 1%)
How Do I Know if I Am Falling Into the 5% TDS or 1% TDS Bracket?
If you have not filed your IT returns in the last 2 financial years, you will be considered under the 5% TDS bracket. You can also check this on your Income-tax e-filing portal.
Is 1% TDS Applicable on All Crypto Transactions?
1% TDS is applicable on any crypto transaction wherever the owner of the asset is changed.
It is applicable on:
Sell Crypto-INR pair on both Exchange and Quick Trade
Buy Crypto-Crypto pair on both Exchange and Quick Trade
Sell Crypto-Crypto pair on both Exchange and Quick Trade
Crypto withdrawals to 3rd party accounts
It's not applicable to Buy transactions of Crypto-INR pairs.
Is TDS Applicable on INR Deposits and Withdrawals?
No, TDS is not applicable on INR Deposits and Withdrawals.
Why Are You Deducting TDS on Crypto Sends / Withdrawals?
As per the regulation, TDS is applicable on every transfer of VDA. This means that TDS will be applied on every transaction where there is a change in ownership of the assets.
Why Do You Deduct TDS When I Trade In Crypto-Crypto Pairs?
In crypto-crypto buy transactions, the base pair will be sold on behalf of the user to buy the crypto. For eg: If you trade in the ETH-USDT pair, you sell an equivalent amount of USDT to buy ETH.
This is the reason for charging 1% TDS on Crypto-Crypto buy orders.
Will I Be Charged on Every Transaction or Only on Transactions That Exceed Rs.10000 in Any Financial Year?
TDS is applicable only if your trade volume exceeds Rs. 10000 or Rs. 50000 (for specified users) in any financial year. However, the exchanges will charge TDS on every transaction. You can then claim a refund/adjust against tax payable while filing your yearly IT Return.
What About My Trades From Before 1ST July 2022, Do I Need to Pay TDS on These as Well?
Trade/transfer of VDA before 1st July 2022 does not attract TDS. However, you are still liable to pay tax @30% on your profits in respect of trades from 1st April 2022.
Should I Pay TDS Directly to the Income TDS Department?
To help make your trading experience as simple and stress-free as possible, the TDS amount will be deducted and deposited on your behalf by ZebPay.
To Whom Do You Pay the TDS Collected From Customers?
Zebpay will make payments to the Government of India on behalf of its customers/users.
Where Can I See My TDS Deductions in the App or Web?
TDS deductions are displayed in the app under the below options.
Exchange - Select the Coin and Click on “My Orders” and go to “Filled Orders” tab
Quick Trade - Select the Coin and click on History icon on the Top right (3 lines)
Send / Receive - Select the coin and click on History tab (3 lines)
There will be an option to download the TDS statement from the “Statement” option inside the Menu tab on the app. This will be available with the next app update release.
Can I Get a TDS Statement / Certificate From ZebPay?
Taxes debited from the users are paid to the Government by ZebPay. It will reflect in your Form 26AS within prescribed timelines. Zebpay will also generate TDS certificates and share with you.
Is TDS Applicable on Lend?
No TDS is not applicable on lending
How Do You Apply TDS on Airdropped Crypto/Tokens?
TDS will be applied when you sell your Airdropped tokens.
What Will Happen to My Pending Buy or Sell Orders?
All pending buy/sell orders will be cancelled on July 1, 2022 00:00 hours for an easy transition and launch of the TDS module within the platform. You can place fresh orders post the announced maintenance period.
Can I Be Exempted From Deducting TDS?
There are no exemptions in TDS on VDAs other than the exemption on aggregated value of consideration. That is less than Rs 50000 ( for Specified) and Rs 10000 (for others).
Can I Get an Exemption if I Have a Tax Exemption Certificate?
Lower deduction of Tax is not available for Section 194S. However, if users have any such certificates please reach out to us with the details by creating a support ticket.
How Can I Claim a Refund of TDS?
You can claim refund/credit of TDS while you file your yearly Income tax return. Please contact your CA/ Tax consultant to know more about this. You can also learn more here: Income Tax India - File TDS Return
How Can I Avoid Paying TDS?
As a resident of India, you are liable to pay taxes wherever applicable. It is unlawful to evade taxes.
Crypto Is Supposed to Be Decentralised, Why Are You Forcing Me to Pay This?
As per the revised Tax regulation, it is mandatory to deduct TDS on the sale or transfer of VDAs. It is a requirement of the law of the land
Hope this information helps in answering your questions about TDS that is applicable from 1st July 2022.