23rd June 2022
The sale/transfer of Virtual Digital Assets (VDA/Crypto) will be subject to tax deduction at source (TDS) at the rate of 1% effective 1st July 2022, as per the Finance Act 2022. This tax, deducted at source, can be adjusted against your overall tax liability at the time of filing your annual income tax returns.
The tax deducted at the origin of a transaction is called TDS. This tax is deducted at the time of transaction from the buyer and remitted to the government on behalf of the seller.
As per the Income Tax Act, CoinSwitch is required to deduct this tax from users during trade execution. We are then required to file TDS returns with the income tax authorities. Please note that TDS is applicable only for sell transactions and not on buy transactions, except in rare cases when the coin is illiquid in India and procured through a VDA to VDA transaction.
However, TDS is not applicable to all individuals. As per the Finance Act 2022, TDS needs to be withheld only when the aggregate trade value of your VDA transactions is greater than 10,000 INR. If your total trade value does not exceed 10,000 INR for the financial year 2022-2023, your VDA transaction will not be subject to TDS.
To ensure transparency, CoinSwitch will provide you with an invoice containing a break-up of all TDS withheld on your transactions. You can access this invoice on the Order History page of the CoinSwitch app. CoinSwitch will also provide users with a Form 16A certificate for TDS deductions every quarter.
1. What is TDS?
Tax Deducted at Source(TDS) is an advance tax collected at the source by the government to establish a trail of transactions.
Under this system, tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the tax authorities by the payer on behalf of the payee.
Effective 1 July 2022, 1% TDS is applicable on the sale/transfer of virtual digital assets (VDA/crypto). CoinSwitch will deduct this tax and remit the amount to the tax authorities.
2. When is TDS deducted?
TDS is applicable for the sale/transfer of Virtual Digital Assets (VDA/Crypto). CoinSwitch will deduct the amount when the transaction is executed. The remaining amount will be credited in your CoinSwitch account after deducting the applicable commission and other charges.
3. What about coins with less liquidity?
In rare cases when you have placed a buy order for an illiquid coin in India, a 1% TDS will be deducted for facilitating the trade through VDA to VDA transactions. If your transaction involves a TDS deduction, it will be reflected in your invoice.
4. How will CoinSwitch facilitate TDS implementation?
For transactions done on/via CoinSwitch, TDS is deducted wherever applicable. Then the balance amount is credited to your CoinSwitch User Account. You can find the details of the TDS deduction in the invoice.
5. Should I deposit TDS with the tax authorities?
CoinSwitch will remit any amount collected as TDS at the time of trade execution 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.
6. Will I get any TDS reports?
CoinSwitch will provide users with an invoice with a break-up of amounts deducted, including TDS and fees, for each order.
Further, CoinSwitch will provide users with TDS certificates (Form 16A) for every quarter. The certificate will contain the details of the TDS deducted by CoinSwitch for the quarter.
7. How do I access my invoice?
Your invoice with the TDS details can be downloaded from the Order History. Invoices will be generated within 48 hours of trade execution.
8. Will TDS be reflected in the income tax department's Form 26AS?
Yes, TDS will be reflected on Form 26AS. Further, CoinSwitch will provide users with a Form 16A every quarter, which will contain the details of the TDS deducted for the sale or transfer of virtual digital assets.
9. How is the 1% TDS calculated?
CoinSwitch is an online crypto trading platform that enabled trade in crypto by way of placing sale and/or purchase orders on behalf of users on third-party crypto exchanges. In case your order is executed on a third-party exchange, we place a buy order on your behalf and credit the VDA (crypto) received to your CoinSwitch account.
Similarly, to sell a VDA (crypto) we use your crypto balance and place a sell order on our own exchange or a third-party exchange. Once the order is executed, we credit your CoinSwitch account in Indian Rupees after deducting a small fee and tax.
Consider the following example:
When the order is executed on our own exchange or an Indian third-party exchange:
The user wants to sell 10 Altcoins. (A)
Price of each altcoin is 20 INR. (B)
CoinSwitch total commission (incl. of discount and exchange fees and GST). (D), say 1 INR.
The gross amount of this trade is (A) x (B) i.e., 10 x 20 = 200 INR. (C)
Net Sale = (C) - (D) = 200 - 1 = 199 INR.
TDS will be applicable on the net sale (i.e., 1% of 199 INR = 1.99 INR). (E)
The actual amount credited to the user’s account will be: (C) - (D) - (E) = 200 - 1 - 1.99 = 197.01 INR.
10. Is there a cap on TDS? Is the TDS the same for a transaction of 100 INR and 1000 INR?
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.
11. 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.
12. When can I claim a refund of TDS?
Users can claim a refund of the TDS deducted at the time of filing their 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.
13. Is there any exemption on TDS?
TDS will not be applicable if your total trade volume (for sale/exchange of VDA-VDA) does not exceed 10,000 INR for the financial year.
14. How is TDS different from 30% gains tax?
TDS is an advance tax to establish a trail of transactions. This tax can be adjusted against your total tax liability.
For virtual digital assets (cryptos), users are liable to pay 30% tax, plus applicable surcharge and cess, on gains (profits) at the time of filing income tax returns.
15. What about the coins we receive via coupons?
For coins received via coupons each month, TDS will be deducted at the time of sale of those VDA. The TDS breakdown will be available in the invoice.
How TDS is calculated?
Thank you for your support as we build a more transparent and sustainable crypto trading platform. If you have any questions, please contact our support team at bit.ly/newcskticket.
We’re always happy to help!