From July 1, 2022, a Tax Deducted at Source (TDS) will be levied on any consideration paid for the sale and or transfer of virtual digital assets (VDAs) for Indians. In this blog, we’ve answered all questions on TDS and where it is applicable. We’ve also made changes to Vauld for you to manage your tax obligations in a seamless manner.
What is TDS?
TDS stands for tax deducted at source. It is a tax paid by an individual/entity to the central government for certain payments like salary, commission, transaction, etc.
As per Section 194S of the Finance Act 2022, all transactions involving the sale or transfer of virtual digital assets (VDAs) will incur a TDS. This will be deducted from a user when selling or transferring VDAs.
When is TDS applicable to cryptocurrencies?
TDS is applicable when making a sale and/or transfer of virtual digital assets on a crypto trading platform. The trading platform will deduct the amount and forward it to the relevant tax authorities on behalf of users.
How much TDS will be charged?
TDS will be charged based on Section 194S of the Finance Bill, 2022. If the specific user comes under Section 206AB, higher rates will be charged.
When will TDS be applicable on Vauld?
TDS will be applicable on the sale, swap, or a trade of a cryptocurrency on the Vauld platform.
We’ve detailed how the TDS will apply in each of our product features:
TDS is not applicable on the following:
- Buying crypto with INR
- Depositing INR on Vauld
- Depositing crypto on Vauld
- AIP buys with INR
- Transferring crypto between Vauld accounts
- Transferring crypto outside the Vauld account
- While taking a loan
- While paying back a loan using the loan token
TDS is applicable on the following:
- Selling crypto for INR
- Buying crypto with crypto
- Swapping/Trading crypto
- AIP buys with crypto
- When a loan is liquidated/paid using the collateral token
- TDS applied when selling crypto for INR
If you sell Bitcoin for INR 10,000, a TDS of 1% is deducted and paid on your behalf to the government. TDS is deducted after charging a transaction fee.
Here’s how this will work:
|Amount post fee||9990|
The same TDS treatment applies for selling or swapping one crypto for another, including AIPs. For AIPs of a basket of cryptocurrencies, TDS is separately deducted at each purchase.
- TDS applied when buying crypto with crypto
TDS is applicable when buying a crypto with a stablecoin or another cryptocurrency.
If you want to buy 1 ETH for 1,000 USDT, a TDS of 1% will be charged and paid on your behalf to the government. TDS is deducted after charging a transaction fee.
(Assuming 1 ETH = 1000 USDT)
Here’s how this will work:
|Conversion including fee||1000||1|
|Amount getting exchanged|
|Balance credited to your wallet|
What happens to the deducted TDS?
Your TDS will be paid to the Government of India on a monthly basis and filings will be made on a quarterly basis. Under the “History” page on Vauld, you can see the TDS deducted on applicable transactions.
Where can I learn more about TDS on VDAs?
Please refer to the Finance Bill 2022, in addition to any updates from the Central Board of Direct Taxes. For all other queries on taxes, please refer to the official website of the tax authority.
The changes in the platform reflect our continued commitment in being a compliant crypto investment platform. Our goal will always be to build a transparent way for you to build wealth through cryptocurrencies. We thank you for your support.
If you have any questions, you can reach out to us at email@example.com.