The Finance Minister of India announced the Union Budget for 2023-2024 on 1 February, 2023. While the crypto asset industry was not high on focus, there was a small but important addition under Income Tax Section 271C and 276B.
Section 271C and Section 276B essentially state the law and consequences that Indian users could face if they fail to pay the Tax Deducted at Source (TDS) before the deadline. You can read the official details on page 89 and page 91 of the Finance Bill, 2023 published by the Income Tax Department of India. For quick highlights, view page 30 of the official Finance Bill Highlights Of 2023.
What does this mean?
In simple words, the government made it clear that it is mandatory to pay TDS when dealing with Virtual Digital Assets (VDAs) for all Indian citizens.
If you’re a CoinDCX user, we are keeping it compliant!
There are two ways VDA users can pay TDS: the hard and complicated way where you manually file for TDS every time you complete a sell trade, or the safe and easy way where you choose a Tax Compliant Exchange for trading VDAs, and they automatically file TDS on your behalf so you don’t have to go through all the hassle, and tax compliance is done by them on your behalf.
At CoinDCX, we are proud to have implemented automatic filing of TDS for all our users since the start of the TDS last year. We’re a Tax Compliant Exchange!
You can check all your TDS Summary and get your TDS Certificates to claim refund. Here’s how:
Go to your account from the top left icon, next to your name.
Scroll down and you will see “Download Reports”. Tap on that.
Here you will be able to generate your TDS Summary and download your TDS certificate for each quarter of the financial year in which TDS was deducted. Use these certificates while filing your Income Tax returns and claim refund if applicable.
If you are new to VDA or not aware of the 1% TDS law, read our earlier blog here.
Frequently Asked Questions
1. Is it mandatory for all international exchanges to file TDS for their Indian customers?
When you trade on overseas exchanges, these platforms don’t follow the Indian rules for TDS in crypto assets. So, if you buy or sell crypto assets on these platforms, it’s your responsibility to make sure you pay the required taxes.
Domestic exchanges like CoinDCX are complying to Indian TDS provisions, so their customers don’t have to worry about it. CoinDCX takes care of paying the required taxes for its customers, whether they are individuals or institutions.
- 2. I am trading crypto assets via Peer to Peer (P2P) networks. How does TDS work here and who provisions it?
For more information on how TDS applies in crypto assets, read our blog here.
If you buy or sell crypto assets via P2P networks, it’s your responsibility to make sure you pay the required taxes.
However if you go via domestic exchanges like CoinDCX, your TDS provisions are taken by the exchange itself.
3. Do I have to pay TDS on my DeFi transactions?
If we take a closer look, DeFi taxes will be applied via various other forms of DeFi crypto asset transactions, i.e., yield farming, crypto asset mining, crypto asset lending, and borrowing. For mining crypto assets, the respective taxation can be of two types. If you have gained crypto assets as a result of mining, it will be taxable under business income. The second type comes in when you have HODL-ed the crypto asset and have gained profits from it. Then you have to pay the 30% tax when you are selling the crypto asset. Read more here.
4. How does TDS work for crypto asset gifting?
We have a detailed blog for this and other questions here.
5. Is there a TDS threshold limit on crypto assets?
No, there is no threshold limit to TDS. 1% TDS remains constant.
Disclaimer: “The information and material contained are subject to change without prior notice including prices which may fluctuate based on market demand and supply. The material available on the site is proprietary of CoinDCX, its parent, and its affiliates and is for informational purposes and informed investors only. This material is not: (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, or (ii) intended to provide accounting, legal, or tax advice, or investment recommendations. Please note Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”
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