What is TDS? When is TDS deducted?
To understand more about TDS, watch the video below:
- To establish a trail of transactions, the government collects an advance tax known as Tax Deducted at Source (TDS) at the source of the transaction.
- Under this system, tax is deducted from income at the source. On behalf of you (the payee), we, the payers (CoinSwitch), withhold the tax and repay it to the respective tax authority.
- Effective July 1, 2022, 1% TDS will be applied to any sale or transfer of digital assets (crypto). CoinSwitch will deduct this tax from any buy-sell transaction you conduct. We will then pay the same to the relevant tax authorities.
- TDS is applicable when buying, selling, or transferring crypto. After deducting the applicable commission and other charges, the remaining amount will be deposited into your CoinSwitch account.
Should I deposit TDS with the tax authorities?
- CoinSwitch will remit the TDS collected with the tax authorities on behalf of the user.
- Details of TDS from various sources of income can be viewed on your Form 26AS statement.
- This amount can be adjusted against your gross tax liability at the time of filing the income tax return.
Is there a cap on TDS?
TDS is calculated as a percentage of the gross amount of the transaction.
For a trade worth 100 INR, the TDS will be 1% of 100 INR = 1 INR.
For 1000 INR, TDS will be 1% of 1000 INR = 10 INR.
Is there any exemption on TDS?
TDS will not be applicable if your total trade volume (for sale/exchange of crypto-to-crypto) does not exceed 10,000 INR for the financial year.
When can I claim a refund of TDS?
You can claim a refund of the TDS deducted at the time of filing your annual income tax returns if the total tax liability at the end of the year is zero or less than the amount deducted as TDS.
- If your total income is not taxable as per Income Tax regulations, you can claim the total TDS deduction as a refund. For example, let's say:
- Your total income = INR 2,50,000
- Your total TDS deduction = INR 10,000
- As per the existing IT regulations, you are not liable to pay any tax. Then you can claim a refund of INR 10,000.
- If your total annual TDS deduction is higher than your total payable annual income tax, then the difference amount can be claimed as a refund. For example, let's say:
- Your total TDS deduction = INR 20,000
- Your total payable income = 15,000
- Then the difference amount of INR 5,000 can be claimed as a refund.
- Total income is the income from all the sources such as salary, profits from crypto trading, rent, etc., during the financial year.
- Total payable income tax is the income tax applicable on your total annual income during the financial year.
- Total TDS deduction is the summation of all the TDS deductions during the financial year.
I am not liable to pay tax. Will TDS be applicable?
- TDS is applicable for all sell transactions, irrespective of the Income tax basic exemption.
- However, you can adjust the TDS against your tax liability at the time of filing your annual tax returns.