FAQs on Crypto TDS

As you are aware, as per the recent guidelines issued by the Indian Government, Crypto trades will attract 1% TDS henceforth. These provisions have come into force from 00:00 hrs IST, 1 July 2022. Here are a few frequently asked questions about the new TDS rules:

Question 1: Who will deduct tax as TDS when crypto is bought or sold via crypto exchanges?

The Central Board of Direct Taxes (CBDT) has clarified that when someone is buying Crypto via an Exchange (even in the case of P2P transactions), Tax can be deducted under section 194S by the Exchange. Making it simple; technically, you as a buyer or seller will not have to do anything. The respective Exchanges you trade on will do the needful.

Question 2: At what rate will tax on crypto be deducted?

Here is a simple table to answer this question:

Question 3: Is TDS applicable on Crypto Withdrawals/Transfers?

TDS is not applicable on Crypto Withdrawals or Transfers. That means tax will be deducted only when Crypto is bought or sold.

Question 4: For whom 5% TDS will be applicable and why?

As per Section 206AB of the Income-Tax Act, 1961, if you have not filed your Income Tax Return in the last 2 years and the amount of TDS is ₹50,000 or more in each of these two previous years, then the tax to be deducted as TDS for Crypto-related transactions will be at 5%. 

Question 5: Can I check the TDS details on any Government portal?

You can find the details of the tax deducted in your Form 26AS (a consolidated annual tax statement issued by the Tax Department that shows the details of tax deducted at source) when updated by the Department. 

Question 6: Can I claim the crypto TDS like other TDS?

Yes! You can claim the tax deducted as TDS on crypto trades when you file ITR for the relevant financial year.

Question 7: Will tax be deducted even if I am making a loss?

Yes! Whether you make a profit or loss, Tax as TDS will be deducted for every Crypto bought or sold.

Question 8: Will I have to pay TDS if I am trading on Foreign exchanges, P2P sites, and DEXes?

Yes! You should be aware that users who transact on international exchanges that do not deduct TDS are liable to pay the tax on their own. Failure to do so would make you non-compliant with the existing tax laws of the land.