What is TDS? How Does It Impact Your Crypto Transactions?

What is TDS, and how does it impact your crypto transactions?

The number of people investing in cryptocurrencies is proliferating, which is unstoppable. At first, people were hesitant about investing in crypto because of their unawareness of trading cryptocurrencies. But now, everyone is becoming smart enough to trade cryptos wisely. But the one topic that is always seen as hard to understand in finance is the TDS. When it comes to the crypto world, people find it even more difficult to calculate it. Well, here I’ll try to simplify it in much simpler terms so that next time your TDS in crypto will be an easy peasy task.

TDS | Overview

TDS or Tax Deducted at Source might seem to be a big technical term, but it's not. The main motto of Tax Deducted at Source is to collect tax from every source of income of an individual. For instance, if a person(payer) is to make a payment to another person(payee or receiver) the tax will be deducted from the payer and goes to the receiver, which in turn will be sent to the Central government’s account. By the end of the year, based on the tax liability, a person can file his tax returns and the liable TDS will be reimbursed by the government. I think I’ve explained the TDS in much simpler terms. Now let us look at how TDS is collected in crypto trading

Impact of TDS on cryptocurrencies

When it comes to cryptocurrency trading, in most cases TDS is applicable for selling cryptocurrencies not for buying cryptocurrencies using fiat currencies. Let me make it clear now, Transactions inclusive of TDS

1. Crypto to crypto/digital asset trading.

2. If receiving Indian Rupee by selling cryptocurrency / digital assets.

In the above two scenarios, the TDS is 1%. Transactions that exclude TDS

1. Buying crypto/digital assets using fiat currency

Now you might have got an idea about the tax deduction in your crypto trading, if not, I shall give you some real-time examples. Let us assume that a user has sold a cryptocurrency for ₹101

1. Let us say the service charge of the exchange, which includes the exchange fee and GST is ₹1

2. The TDS percent is 1% which should be calculated after the deduction of the transaction fee. Which means, ➔ ₹101(total amount) - ₹1(service charge)=₹100

3. Now, the TDS (1%) should be deducted from the ₹100. ➔ 1% of ₹100=₹1 ➔ ₹100-₹1=₹99 Here, the ₹99 will be sent to the user’s wallet who sold the crypto. ₹1 of the service charge will be obtained by the exchange. ₹1 of TDS is remitted to the central government’s account.

Role of Cryptobiz exchange

● We will send your TDS to the central government’s account on your behalf.

● Once the transaction is completed, the invoice will be provided to the user containing all the tax data.

● Form 16A will be provided to the user by Cryptobiz for filing the tax returns.

● By utilizing these documents, the user can file for the tax returns by the year-end, and the user can claim the reimbursement of liable tax returns. A user can entirely rely on Cryptobiz for trading cryptocurrencies, and we will help you with your TDS and the documents for filing your tax returns.