You are still liable to pay the tax even if you sell it to someone outside India. TDS doesn't increase the tax liability of the seller. It is just a mechanism to track the trade of the cryptocurrencies. But since, imposing TDS requirements on the foreign buyers is difficult so the government left them outside the purview of this section.
Topic: TDS on Cryptocurrencies [Explained] (Read 340 times)
You are still liable to pay the tax even if you sell it to someone outside India. TDS doesn't increase the tax liability of the seller. It is just a mechanism to track the trade of the cryptocurrencies. But since, imposing TDS requirements on the foreign buyers is difficult so the government left them outside the purview of this section.
You are still liable to pay the tax even if you sell it to someone outside India. TDS doesn't increase the tax liability of the seller. It is just a mechanism to track the trade of the cryptocurrencies. But since, imposing TDS requirements on the foreign buyers is difficult so the government left them outside the purview of this section.
This isn't that simple. You will need Foreign Inward Remittance Certificate (FIRC) from your Authorized Dealer as the proof that the money you are receiving is against a genuine export of goods or services. Without a valid FIRC, GST authority may reject your stand and you will have to pay 18% out of your own pocket.
By the way, why do you want to show it as an export? There is no GST on trading. Only TDS and Income Tax provisions applicable on trading. Unless you are earning crypto by selling goods or services, there is no applicability of GST.s
You are still liable to pay the tax even if you sell it to someone outside India. TDS doesn't increase the tax liability of the seller. It is just a mechanism to track the trade of the cryptocurrencies. But since, imposing TDS requirements on the foreign buyers is difficult so the government left them outside the purview of this section.
Q1. What if I buy/sell coins from/to foreign person?
A1. TDS provisions are only applicable if the seller is a resident of India. If you buy coins from a foreign person (including foreign exchanges), you aren’t required to deduct TDS. Conversely, if you are a seller, the foreign person is required to deposit TDS but since it is not practically possible, NO TDS applicable when you buy or sell coins from or to a foreign person.
Then I will be paying Zero TDS + Zero GST
Damn, I guess I will find a buyer in US since the government seems to have no problem with it
TDS on coin conversion is pretty stupid, and it will kill all Indian exchanges. I would rather exchange it at foreign exchange instead of paying 1% on every conversion to some Indian cex.
In a way, they didn't directly ban cryptos in India but they killed it with a knife to the back.
You are still liable to pay the tax even if you sell it to someone outside India. TDS doesn't increase the tax liability of the seller. It is just a mechanism to track the trade of the cryptocurrencies. But since, imposing TDS requirements on the foreign buyers is difficult so the government left them outside the purview of this section.
However, I agree with your second point. Locking 1% from every trade as a TDS will lead to liquidity crunch and virtually kill the market. We are already seeing horrendous drop in the volume on Indian exchanges and the situation is going to get worse unless we have a better regulations.
Q1. What if I buy/sell coins from/to foreign person?
A1. TDS provisions are only applicable if the seller is a resident of India. If you buy coins from a foreign person (including foreign exchanges), you aren’t required to deduct TDS. Conversely, if you are a seller, the foreign person is required to deposit TDS but since it is not practically possible, NO TDS applicable when you buy or sell coins from or to a foreign person.
So If I sell my cryptos to someone in US, and ask them to wire me the money.
Then I will be paying Zero TDS + Zero GST
Damn, I guess I will find a buyer in US since the government seems to have no problem with it
TDS on coin conversion is pretty stupid, and it will kill all Indian exchanges. I would rather exchange it at foreign exchange instead of paying 1% on every conversion to some Indian cex.
In a way, they didn't directly ban cryptos in India but they killed it with a knife to the back.
The worst part about TDS applicability put in by the government is that even if you are an individual who is not involved in any kind of business and profession and is just doing cryptos for investment or even fun has to deduct TDS while buying/ selling the coin and deposit it with the government. In case of exchanges it was easier as the burden to comply with all the statutory norms was on the shoulders of the government but in the case of individuals, it will be on people which will obviously reduce their enthusiasm to do crypto trading. I feel this law can be crypto killer in India.
If you do the research you will find that the government of India are bringing these laws towards crypto so that they can discourage crypto trading/investments in India.
First they bought the 30% taxation law and then they bought the 1% TDS and rumors are there that they are about to bring 28% additional tax as GST on crypto.
So all of these are steps that the government of India is taking to eliminate crypto from India.
The worst part about TDS applicability put in by the government is that even if you are an individual who is not involved in any kind of business and profession and is just doing cryptos for investment or even fun has to deduct TDS while buying/ selling the coin and deposit it with the government. In case of exchanges it was easier as the burden to comply with all the statutory norms was on the shoulders of the government but in the case of individuals, it will be on people which will obviously reduce their enthusiasm to do crypto trading. I feel this law can be crypto killer in India.
If you do the research you will find that the government of India are bringing these laws towards crypto so that they can discourage crypto trading/investments in India.
First they bought the 30% taxation law and then they bought the 1% TDS and rumors are there that they are about to bring 28% additional tax as GST on crypto.
So all of these are steps that the government of India is taking to eliminate crypto from India.
I am not so wise when it comes to taxation but when I pay my monthly internet bill, an amount of 18% GST is added to the total bill.
So wouldn't the government impose GST on the total sale ? I wish that doesn't happen but asking it just for more clarity.
The worst part about TDS applicability put in by the government is that even if you are an individual who is not involved in any kind of business and profession and is just doing cryptos for investment or even fun has to deduct TDS while buying/ selling the coin and deposit it with the government. In case of exchanges it was easier as the burden to comply with all the statutory norms was on the shoulders of the government but in the case of individuals, it will be on people which will obviously reduce their enthusiasm to do crypto trading. I feel this law can be crypto killer in India.
If you do the research you will find that the government of India are bringing these laws towards crypto so that they can discourage crypto trading/investments in India.
First they bought the 30% taxation law and then they bought the 1% TDS and rumors are there that they are about to bring 28% additional tax as GST on crypto.
So all of these are steps that the government of India is taking to eliminate crypto from India.
The worst part about TDS applicability put in by the government is that even if you are an individual who is not involved in any kind of business and profession and is just doing cryptos for investment or even fun has to deduct TDS while buying/ selling the coin and deposit it with the government. In case of exchanges it was easier as the burden to comply with all the statutory norms was on the shoulders of the government but in the case of individuals, it will be on people which will obviously reduce their enthusiasm to do crypto trading. I feel this law can be crypto killer in India.
If you do the research you will find that the government of India are bringing these laws towards crypto so that they can discourage crypto trading/investments in India.
First they bought the 30% taxation law and then they bought the 1% TDS and rumors are there that they are about to bring 28% additional tax as GST on crypto.
So all of these are steps that the government of India is taking to eliminate crypto from India.
The worst part about TDS applicability put in by the government is that even if you are an individual who is not involved in any kind of business and profession and is just doing cryptos for investment or even fun has to deduct TDS while buying/ selling the coin and deposit it with the government. In case of exchanges it was easier as the burden to comply with all the statutory norms was on the shoulders of the government but in the case of individuals, it will be on people which will obviously reduce their enthusiasm to do crypto trading. I feel this law can be crypto killer in India.
Unocoin also sent me the fee applicable for these transactions. It is 1%-2% TDS applicable for such transactions depending on the IT returns as per the latest blog of Unocoin. Now I am glad that they cleared this part up and the exchanges are directly cutting off TDS which makes it easier to claim while filing returns.
Too much complicated tax structure lol, why take all this trouble to trade crypto in India? Better hide from tax or move to other country or just don’t invest at all.
Another detailed post by @webtricks, thanks for sharing it, and now after reading this post I need to move to Dubai for good as for now things are not looking good for the crypto community in India.
Fantastic CA sahib. Happy to see your contribution to the community.
CBDT has finally issued the guidelines in regards to TDS provisions on cryptocurrencies and I will try my best to explain everything in the easiest manner possible. Let’s start then,
There can be two possible scenarios – either person trades on Exchange or Peer-to-Peer. In both the case, the primary responsibility to deduct TDS lies with the buyer. However, to simplify the process, the onus of TDS has been shifted to the Exchange in the first case, so, let’s discuss it first:
CASE I: A person buys/sells crypto via Exchange
As a buyer:
As a seller:
In all the cases above where TDS is applicable, the Exchange will deduct 1% TDS automatically and credit you the remaining 99% amount. Nothing changes for you as a user, no additional compliance. However, like I said above, the primary responsibility to deduct TDS lies with the buyer, so make sure to only use reputable exchanges which are deducting TDS, else, the department will catch you, not the exchange.
CASE II: A person buys/sells crypto peer-to-peer
As a buyer:
As a seller:
Since, there is no middleman in peer-to-peer trade, the responsibility to deposit TDS lies with the counterparty. Thus, the buyer has to deposit TDS to the government if he directly buys coins from a seller. For example, I buy 2 BTC for Rs. 40,00,000 from Amit. Now, it is my duty to keep Rs. 40,000 aside, deposit it to the government and only credit Rs. 39,60,000 to Amit.
In second case, where two parties are exchanging coins, for example, I sell 2 BTC to Amit for 40 ETH, both of us are buyer and seller. So, both me and Amit are required to deduct and deposit TDS. The TDS amount will be 1% equivalent of 2 BTC at the prevailing market price.
Now, the question arises – how to deposit TDS? The government has divided the traders into 2 groups:
If you lie in the category of specified person, the process is rather simple for you. Every time you do a P2P trade, you have to file 26QE form. Here is how this form looks - 26QE FORM. Basically, this form needs to be filed online, you have to visit this link: E-Payment, select Form 26QE (will be available from 1st July), fill in all the details about yourself and the seller, proceed and deposit amount equals to 1% value of the trade. That’s it, no need to acquire TAN number.
However, if you are not a specified person and do trading with volume in excess of Rs. 1 crore during the year, you will have to follow more detailed process which involves acquiring TAN number and filing quarterly 26Q statements. Better consult CA in this case.
Note: You only have to file above statements if you do P2P trades. No need to worry about TDS compliance if you are doing trades on the Exchanges.
Other questions:
Q1. What if I buy/sell coins from/to foreign person?
A1. TDS provisions are only applicable if the seller is a resident of India. If you buy coins from a foreign person (including foreign exchanges), you aren’t required to deduct TDS. Conversely, if you are a seller, the foreign person is required to deposit TDS but since it is not practically possible, NO TDS applicable when you buy or sell coins from or to a foreign person.
Q2. Is TDS a tax or will I get the refund?
A2. The main purpose of TDS is to identify the taxable transactions, however, TDS in not your final tax. So, you will get the refund of TDS when you will file the income tax return. For example, your tax liability for the year comes out to be Rs. 70,000 and your TDS deducted during the year was Rs. 50,000 so you will only need to pay Rs. 20,000 more, TDS of Rs. 50,000 will be adjusted against the tax. If it is in excess of the tax, e.g., tax liability is Rs. 70,000 and TDS deducted is Rs. 80,000 then the remaining amount of Rs. 10,000 will be credited to your bank.
Q3. Is there any minimum amount not chargeable to TDS?
A3. For specified persons, the limit is Rs. 50,000 and for non-specified person, the limit is Rs. 10,000. However, this limit counts from April 1st, not 1st July. Let suppose, you have already sold coins worth Rs. 45,000 via P2P from 1st April to 30th June and now you are selling coins worth Rs. 10,000 then TDS will be applicable and the buyer will have to deposit Rs. 100 to the government and only credit Rs. 9,900 to you because the limit of Rs. 50,000 is breached (45K+10K).
There can be two possible scenarios – either person trades on Exchange or Peer-to-Peer. In both the case, the primary responsibility to deduct TDS lies with the buyer. However, to simplify the process, the onus of TDS has been shifted to the Exchange in the first case, so, let’s discuss it first:
CASE I: A person buys/sells crypto via Exchange
As a buyer:
- Deposits INR on the Exchange via UPI, net banking or other means – No TDS applicable
- Converts INR to cryptocurrency – e.g., buys USDT with INR balance – No TDS applicable
- Trades one coin for the other – e.g., buys BTC with USDT – TDS applicable
As a seller:
- Trades one coin for the other – e.g., sells BTC for USDT – TDS applicable
- Converts cryptocurrency to INR – e.g., sells USDT for INR – TDS applicable
- Withdraws INR to the bank – No TDS applicable
In all the cases above where TDS is applicable, the Exchange will deduct 1% TDS automatically and credit you the remaining 99% amount. Nothing changes for you as a user, no additional compliance. However, like I said above, the primary responsibility to deduct TDS lies with the buyer, so make sure to only use reputable exchanges which are deducting TDS, else, the department will catch you, not the exchange.
CASE II: A person buys/sells crypto peer-to-peer
As a buyer:
- Sends INR, receives cryptocurrency – e.g., buying BTC with bank transfer – No TDS applicable
- Trades one coin for the other – e.g., buying BTC with USDT – TDS applicable
As a seller:
- Receives INR, sends cryptocurrency – e.g., selling BTC and receiving INR in bank – TDS applicable
- Trades one coin for the other – e.g., selling BTC for USDT – TDS applicable
Since, there is no middleman in peer-to-peer trade, the responsibility to deposit TDS lies with the counterparty. Thus, the buyer has to deposit TDS to the government if he directly buys coins from a seller. For example, I buy 2 BTC for Rs. 40,00,000 from Amit. Now, it is my duty to keep Rs. 40,000 aside, deposit it to the government and only credit Rs. 39,60,000 to Amit.
In second case, where two parties are exchanging coins, for example, I sell 2 BTC to Amit for 40 ETH, both of us are buyer and seller. So, both me and Amit are required to deduct and deposit TDS. The TDS amount will be 1% equivalent of 2 BTC at the prevailing market price.
Now, the question arises – how to deposit TDS? The government has divided the traders into 2 groups:
- Specified Persons – If you don’t do any business or profession. For example, you are salaried employee and invest in cryptos as a side-activity. Or you have business or profession (for example, in the form of freelancing or crypto trading) but your total revenue doesn’t exceed Rs. 1 crore.
- Others – Any person other than mentioned above.
If you lie in the category of specified person, the process is rather simple for you. Every time you do a P2P trade, you have to file 26QE form. Here is how this form looks - 26QE FORM. Basically, this form needs to be filed online, you have to visit this link: E-Payment, select Form 26QE (will be available from 1st July), fill in all the details about yourself and the seller, proceed and deposit amount equals to 1% value of the trade. That’s it, no need to acquire TAN number.
However, if you are not a specified person and do trading with volume in excess of Rs. 1 crore during the year, you will have to follow more detailed process which involves acquiring TAN number and filing quarterly 26Q statements. Better consult CA in this case.
Note: You only have to file above statements if you do P2P trades. No need to worry about TDS compliance if you are doing trades on the Exchanges.
Other questions:
Q1. What if I buy/sell coins from/to foreign person?
A1. TDS provisions are only applicable if the seller is a resident of India. If you buy coins from a foreign person (including foreign exchanges), you aren’t required to deduct TDS. Conversely, if you are a seller, the foreign person is required to deposit TDS but since it is not practically possible, NO TDS applicable when you buy or sell coins from or to a foreign person.
Q2. Is TDS a tax or will I get the refund?
A2. The main purpose of TDS is to identify the taxable transactions, however, TDS in not your final tax. So, you will get the refund of TDS when you will file the income tax return. For example, your tax liability for the year comes out to be Rs. 70,000 and your TDS deducted during the year was Rs. 50,000 so you will only need to pay Rs. 20,000 more, TDS of Rs. 50,000 will be adjusted against the tax. If it is in excess of the tax, e.g., tax liability is Rs. 70,000 and TDS deducted is Rs. 80,000 then the remaining amount of Rs. 10,000 will be credited to your bank.
Q3. Is there any minimum amount not chargeable to TDS?
A3. For specified persons, the limit is Rs. 50,000 and for non-specified person, the limit is Rs. 10,000. However, this limit counts from April 1st, not 1st July. Let suppose, you have already sold coins worth Rs. 45,000 via P2P from 1st April to 30th June and now you are selling coins worth Rs. 10,000 then TDS will be applicable and the buyer will have to deposit Rs. 100 to the government and only credit Rs. 9,900 to you because the limit of Rs. 50,000 is breached (45K+10K).
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