India's 1% TDS Rule On Crypto (VDA) Explained

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If you are into Crypto (VDA) and living in India, please be aware that the 1% TDS rule is effective from 1st July, 2022.

We are fucked bros! xD

Time to leave the country? Not yet.

First, let's understand how this rule will apply and affect all of us.

What Is TDS?

For those who don't know, TDS is Tax Deducted at Source. If you have worked in a company within India, then you must have a TDS entry in your salary slip. As the name suggests, it was introduced by the Income Tax department to collect tax from the very source of income. It is then credited to the central government's account. For whatever fucked up reason, Finance Ministry decided to put 1% TDS on crypto trading in addition to a flat 30% on all Crypto gains. After filling up your taxes, you can claim TDS refund if your tax liability is lower than the amount deducted.

1% TDS On VDA

Tax deduction at source (TDS) will be applicable on the transfer of “Virtual Digital Assets”, including crypto assets, from JULY 1st, 2022, as per (Section 194S) the Indian Income Tax Act. Please checkout the following basic terms:

• The TDS is only applicable if your aggregate trades crossing INR 10k in the financial year.
• No TDS will be applicable on INR to Crypto buy orders.
• Each Crypto to Crypto, buy or sell order will be charged with 1% TDS
• Crypto To INR sell order will be charged with 1% TDS
• All exchanges are liable to deduct this tax on every trade

There are two slabs:

1. 1% if the user has filed Income Tax Returns of last two years
2. 5% if the user has not filed income tax returns for at least one year of the last two years and also have TDS deductions of equal to, or more than INR 50,000 in at least one year of the last two years.

You can choose as per the condition of your tax filling in the last two years. If you haven't done it, I would suggest you to go for 5% until you enter the next financial year.

Industry Players Are Not Happy

Obviously they are not! Who will? 30% flat tax has already killed the trading volumes and 1% TDS on each transaction will further hurt the industry. People will prefer P2P trades and foreign exchanges. This will only increase tax evasion by the traders who would want to avoid going through all that pain. They may land in legal trouble for doing so. It is also a a huge burden on the tax system and the crypto investors. Only time will tell the ramifications of this rule. I will keep on updating you with the latest developments?

As an Indian, what are you planning to do now? Comment below!

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_{Not financial advice. For infotainment purposes only.}

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