š” Key Takeaway
India requires a 1% TDS (Tax Deducted at Source) on cryptocurrency transactions, which can be claimed as advance tax payment when filing returns.
What is TDS on Crypto Transactions?
TDS (Tax Deducted at Source) is a mechanism where tax is deducted at the time of payment. For cryptocurrency transactions, a 1% TDS is deducted by exchanges or buyers when you sell your crypto assets.
TDS Rate and Exemption Thresholds
TDS Rate
1%
On transaction value
Primary Exemption (Individuals)
ā¹50,000
Most common exemption limit
šÆ Detailed Exemption Criteria (Section 393)
ā¹50,000 Exemption for Individuals/HUF
No TDS if aggregate value during tax year ā¤ ā¹50,000 when:
- Business turnover ā¤ ā¹1,00,00,000 OR professional receipts ā¤ ā¹50,00,000 in previous year
- OR no business/professional income at all
ā¹10,000 Exemption for Others
All other persons (companies, partnerships, etc.) get exemption only up to ā¹10,000
How TDS Works on Crypto
TDS Calculation Formula
TDS Amount = Transaction Value Ć 1%
Amount Received = Transaction Value - TDS Amount
š TDS Examples
Example 1: Bitcoin Sale (Above Threshold)
ā TDS of ā¹5,000 can be claimed as advance tax payment in your ITR
Example 2: Individual with ā¹50,000 Exemption
ā No TDS as aggregate annual sales < ā¹50,000 (Individual exemption)
TDS Exemption Table
š Simple TDS Exemption Guide
šÆ Will I Pay TDS? - Simple Flowchart
ā Who Gets ā¹50,000 Exemption?
ā ļø Who Gets Only ā¹10,000 Exemption?
š” Key Points:
- Annual limit: This is total crypto sales for the entire financial year, not per transaction
- Above limits: If you exceed your limit, TDS applies to ALL transactions (not just the excess)
- Previous year check: Business turnover is checked for the previous financial year
Understanding Exemption Thresholds
š Practical Application of Exemptions
Scenario A: Salaried Individual
ā Gets higher exemption as no business income
Scenario B: High-Turnover Business
ā ļø Gets lower exemption due to high business turnover
Who Deducts TDS?
š¢ Cryptocurrency Exchanges
- ā¢ WazirX, CoinDCX, Zebpay, etc.
- ā¢ Deduct TDS when you sell crypto
- ā¢ Provide TDS certificates
- ā¢ File TDS returns with government
- ā¢ Responsible for remitting TDS
š¤ Individual Buyers
- ā¢ P2P transactions above ā¹50 lakh/year
- ā¢ Must deduct TDS on purchases
- ā¢ Apply for TAN (Tax Deduction Account Number)
- ā¢ File quarterly TDS returns
- ā¢ Provide TDS certificates to seller
Important TDS Scenarios
š± Crypto-to-Crypto Exchanges
When you exchange one crypto for another:
- TDS is deducted on the sale value of the first crypto
- No TDS on the purchase of the second crypto
- Each exchange leg is treated separately
ā ļø Non-Resident Indians (NRI)
Special considerations for NRIs:
- Higher TDS rates may apply based on tax treaty
- Form 15CA/15CB may be required
- Foreign exchange regulations apply
- Consult tax advisor for compliance
šļø No TDS Certificate = Problem
If TDS is deducted but no certificate is provided:
- You cannot claim TDS credit in ITR
- Contact the exchange/buyer immediately
- File complaint with tax authorities if needed
- Keep all transaction records as proof
TDS vs. Final Tax Liability
š How TDS Credit Works
Step 1: TDS Deduction
Exchange deducts 1% TDS when you sell crypto (e.g., ā¹5,000 on ā¹5,00,000 sale)
Step 2: Calculate Actual Tax
30% tax on gains: If gain is ā¹2,00,000, tax = ā¹60,000
Step 3: Adjust in ITR
Final payment = ā¹60,000 (tax) - ā¹5,000 (TDS) = ā¹55,000 additional payment required
š” Pro Tip
TDS is just advance tax payment, not your final tax liability:
- Always calculate your actual 30% tax on gains
- TDS credit reduces your final tax payment
- If TDS > actual tax, you get refund
- Keep all TDS certificates safe for ITR filing
š Next Chapter Preview
In the next chapter, we'll cover record keeping and documentation requirements for cryptocurrency transactions and tax compliance.