TDS on Cryptocurrency, VDA & NFTs Calculation – Government of India has introduced the 1% TDS on Indian resident who is transferring their virtual digital assets (VDA) or investment in cryptocurrencies, non-fungible tokens (NFTs), and other virtual assets. TDS exemption is up to ₹10,000 in a fiscal year applicable to any person other than a ‘specified person’.
Example for calculation as per Mint :
An NFT sale price is $100. Including an artist fee of 5%, services fee (including GST) of 2.95%, the net sales amount of the NFT token comes at $92.05 (sales price minus artist fee and services fee. Further, 1% TDS will be implied on the net sale amount, which will be $0.92 (1% of $92.05). Taking into consideration these factors, the actual amount deposited to the user would be $91.13.
What is NFT or Non-Fungible Tokens ?
Key Highlights :
NFTs are the cryptographic assets on a blockchain that are not exchangeable because of their nature of being distinguished from each other. Simply put, they are not replaceable or interchangeable with any other cryptocurrency avenues. NFTs are packed with unique cryptographic tokens.
How does 1% TDS Calculate on VDA ?
1. Trading platforms will deduct the TDS and remit the amount to the tax authorities.
2. TDS is applicable for the sale/transfer of Virtual Digital Assets (VDA/Crypto). The tax will be deducted only when trade is executed. The remaining amount will be deposited in your account after deducting the applicable commission and other charges.
3. Trading platform will provide the TDS deduction in the invoice.
4. TDS will be charged on – 1) buyers in India who transact in cryptocurrency (to buy VDAs) will be charged 1% TDS on the transaction amount; 2) sellers in India who transact either in cryptocurrency or in fiat currency (to earn from selling their VDAs) will be charged 1% TDS on the transaction amount.
5. Details of TDS from various sources of income can be viewed on your Form 26AS statement. This amount can be adjusted against your gross tax liability at the time of filing the income tax return. Crypto exchanges like Jump Trade will remit any amount collected as TDS at the time of trade execution with the tax authorities on behalf of the user.
6. Cryptocurrency exchanges will provide users with an invoice with a break-up of amounts deducted, including TDS and fees, for each order after the sale has been executed and recorded in the database.
7. TDS is applicable for all sell transactions, irrespective of the Income-tax basic exemption. However, you can adjust the TDS against your tax liability at the time of filing your annual tax returns.
8. Users can claim a refund of the TDS deducted at the time of filing their annual income tax returns if the total tax liability at the end of the year is zero or less than the amount deducted as TDS.
9. TDS is a tax withheld at the source at the point of the transaction itself. This tax can be adjusted against your total tax liability. TDS under Section 194S would be deducted by the buyer at the time of remittance of consideration to the seller.
Know – How to Calculate Tax on Share Dividends ?
10. For the transfer of virtual digital assets (cryptos, NFTs, etc.), users are liable to pay tax at 30% under Section 115BBH, plus applicable surcharge and cess, on capital gains (profits) at the time of filing income tax returns. This would be done on a self-assessment basis.
