How will this impact you, the regular crypto trader? Here’s a ready reckoner for you to understand this development
Starting this month, all your cryptocurrency transactions will be subjected to a 1% TDS. This is in addition to the 30% tax you’ll have to pay on your income from virtual digital assets (VDAs) such as crypto.
But much like Delhi-based professional and crypto investor Karan, many crypto users still have “no idea or clarity” as to how this would pan out on their finances.
Crypto exchanges are already on track for this development, having integrated the processes required to collect TDS. However, while they remain skeptical, the general sentiment was of acceptance, since it gives investors “transparency” and “clarity to plan their trades”.
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“We believe that the government will monitor the implementation and consider reducing the TDS percentage to create a healthy and compliant ecosystem,” said Vikram Subburaj, CEO, of Giottus Crypto Platform.
How will this impact you, the regular crypto trader? Here’s a ready reckoner for you to understand this development:
HOW WILL THE TDS BE IMPLEMENTED?
Simply put, the government will first eke out the applicable tax before you get your final amount of income or asset sales. But it can get tricky in crypto, where transactions can either be in INR or in terms of other cryptos. So how to proceed? There are two cases.
INR transactions
At present, BTC is trading at $19, 032. That means 1 bitcoin is around Rs 15,02,435.63. But crypto markets are on a free-falling spree currently. Since last year, the global crypto markets have wiped off around $2 trillion of investor money. Most investors in the market are fearful and in a “let’s dump our holdings” mode.
These are rough times to sell. Say you sell your BTC, which is worth Rs 15,00,000 for just Rs 12,00,000. Remember, under new IT rules, you cannot write off this loss (worth Rs 3,00,000) against any income you generate from other sources.
So, in addition to this, a TDS of Rs 12,000 will be deducted at your end. You will receive the remaining amount i.e. Rs 11,88,000.
Crypto-Crypto transactions
Say you’re selling 5 ADA for 1 BTC. Here too, individual conversions can get tricky. So, TDS for both buyer and seller will be calculated in terms of the primary crypto or the quote asset. In this case, it is BTC. On the other hand, ADA is the base asset, because its value is being expressed in terms of the quote asset.
As the seller, you will have to pay 5.05 ADA (1% of 5 ADA) for 1 BTC.
If you are on the buying end here, i.e. you are purchasing 1 BTC for 5 ADA, you will only get 0.99 BTC (1% of 1 BTC) for 5 ADA.
ADVERSE EFFECTS
As per CA Bhavesh Jindal, who works as a senior tax associate with Ludhiana-based Ashwani and Associates, the TDS move seems desperate.
“Instead of widening the scrutiny net on crypto exchanges and banking system, which is required to curb unaccounted crypto transactions, the system is asking assesses to make undue compliances. This is absolutely absurd and against the basic framework of the taxpayer’s charter. Alongside, it is nearly blocking almost 20% of the amount in any crypto barter transaction,” he said.
Amajot Malhotra, Country Head, Bitay, said: “The recent provision of 1% TDS on crypto transactions is a modern instance of a tax provision that would be highly detrimental to the crypto industry”.
But Rajagopal Menon, Vice President at WazirX, advises adopting a more “wait and watch approach”.
“We will be in a better position to understand this by the second week of July. The current market scenario and tax structure have led to a record fall in regular crypto trading across the industry. One of the reasons for this could be that investors are shifting to holding crypto for a significant time period instead of selling it. But at present, it is still premature to predict the ramifications of TDS.”
