Cryptocurrency investments in India have seen another taxation called Tax Deduction at Source (TDS). Generally, TDS is applicable on an individual’s salary, income from deposits, savings schemes, securities and other instruments. Bringing TDS on cryptocurrencies, non-fungible tokens (NFTs) and other virtual assets is an attempt by the Indian government to tighten the bolt for trading in this market, which has no regulatory back-up and comes with high risks.
1% TDS Will be deducted from any Indian resident who is transferring his Virtual Digital Assets (VDA). TDS exemption is up to 10,000 in a financial year applies to a person other than the ‘specified person’.
As per the Income Tax Act and circulars issued by CBDT, said Kameshwaran Elangovan, Co-Founder and Chief Operating Officer, GuardianLink, said Co-Founder, Jump.trade NFT The exchange that facilitates trading of VDAs is required to deduct this tax from its users during trade execution. “We are then required to file TDS returns with the income tax authorities,” he said.
Jump.Trade, a global gaming NFT marketplace launched by GuardianLink.
The GuardianLink co-founder gave an example from the point of view of an NFT:
Let’s say an NFT sale price is $100. Including an artist fee of 5%, a service fee of 2.95% (inclusive of GST), the net sale amount of NFT tokens comes to $92.05 (sale price minus artist fee and service fee). In addition, 1% TDS will be netted on the sale amount, which will be $0.92 (1% of $92.05). Taking these factors into account, the actual amount deposited by the user will be $91.13.
NFTs are cryptographic assets on a blockchain that are not exchangeable due to their nature of being isolated from each other. Simply put, they are not replaceable or interchangeable with any other cryptocurrency avenues. NFTs are packaged with unique cryptographic tokens.
The GuardianLink co-founder highlights 10 key points on jump.trade in his blog ‘Tax Implications’. These are:
1. TDS is a means of collecting tax on income at the time of transaction itself. It is deducted by the buyer and deposited with the government on behalf of the seller. While filing income tax return, seller can avail tax deducted earlier and set it against his tax liabilities. Jump.Trade will deduct this tax and remit the amount to the tax authorities.
2. TDS is applicable for sale/transfer of Virtual Digital Assets (VDA/Crypto). Jump.trade will deduct the amount when the trade is executed. The balance amount will be credited to your account after deducting applicable commission and other charges.
3. TDS is deducted, where applicable, for transactions done on/through Jump.Trade. The balance is then credited to your Jump.Trade wallet. You can find the details of TDS deduction in Challan.
4. TDS to be levied – 1) Buyers in India who transact in cryptocurrency (to buy VDA) will be charged 1% TDS on the transaction amount; 2) Sellers in India who transact in either cryptocurrency or fiat currency (to earn from selling their VDAs) will be levied 1% TDS on the transaction amount.
5. Details of TDS from various sources of income can be seen on your Form 26AS statement. This amount can be adjusted against your gross tax liability at the time of filing income tax return. Crypto exchanges like JumpTrade will remit any amount collected as TDS at the time of trade execution with the tax authorities on behalf of the user.
6. The cryptocurrency exchange will provide users with an invoice with a break-up of the amount deducted including TDS and charges for each order after the sale is executed and entered into the database.
7. TDS is applicable on all sales transactions, irrespective of principal exemption from income tax. However, you can adjust TDS against your tax liability while filing your annual tax return.
8. If the total tax liability at the end of the year is nil or less than the amount deducted as TDS, users can claim refund of TDS deducted at the time of filing their annual income tax return.
9. TDS is a tax withheld at source at the point of transaction itself. This tax can be adjusted against your total tax liability. TDS under section 194S shall be deducted by the buyer at the time of remittance of the consideration to the seller.
10. For transfer of virtual digital assets (crypto, NFT, etc.), users are liable to pay 30% tax under section 115BBH on capital gains (gains), as well as applicable surcharges and cesses, at the time of filing income tax. Return. This will be done on the basis of self-assessment.