What is 1% TDS on crypto trade in Cofinex App – Crypto TDS India Calculation
Cofinex App – As per the current crypto regulations, capital gains or profits on cryptocurrencies will be taxed at 30% with an additional TDS tax of 1% on all trading transactions.
Following the win in the Supreme Court against the de-facto ban from the RBI, the crypto space has seen a massive adoption within the Indian mass. If you are new to the space, crypto tokens are basically decentralized digital assets that are usually traded and invested in, much like other traditional assets. The most interesting aspect of these digital tokens is their underlying blockchain technology. This public ledger makes any transactions made within the space visible to everyone.
Owing to the rising popularity of the crypto space, during the Budget 2022 session, the Hon’ble Finance Minister Mrs. Nirmala Sitharaman announced revolutionary changes to the virtual asset class. Considering the magnitude and frequency of these transactions, the government has proposed the following specific tax regime for the industry:
Income from the transfer of any virtual digital asset to be taxed at the rate of 30%
TDS of 1% to be charged on payments made for the transfer of virtual assets, above a certain monetary threshold
The gift of virtual digital assets is proposed to be taxed in the hands of the recipient
As per the regulations, the tax of 30% on your annual returns will be applied annually, during every financial year-end, while the 1% TDS will be made effective from 1st July on “Payment on transfer of Virtual Digital Asset”. TDS is the tax deducted at the source which is paid to the Government on behalf of the deductor by Cofinex as a part of compliance with the new crypto taxation rules announced in the Union Budget 2022. This will be available as a credit against your tax liabilities at the end of the financial year.
In compliance to this, all users will have to mandatorily complete their KYC process on/or before July 1, 2022 in order to make any transaction (Buy/Sell) on Cofinex.
Cofinex/Web
The following table summarises the applicability of TDS on various order types:
| Order Type | TDS Applicability |
|---|---|
| Insta Spot Buy (App) / Quickbuy Insta Buy (Web) | No TDS is applicable |
| Insta Spot Sell (App) / Quickbuy Insta Sell (Web) | 1% TDS is applicable |
| Spot Buy – INR pairs | No TDS |
| Spot Sell – INR pairs | 1% TDS is applicable |
| Spot Buy – Non-INR pairs (C2C) | 1% TDS |
| Spot Sell – Non-INR pairs (C2C) | 1% TDS |
| Margin Long | 1% TDS on total value of position for both opening and closing orders |
| Margin Short | 1% TDS on total value of position for both opening and closing orders |
| Lend/Earn | No TDS is applicable |
| Futures | No TDS is applicable |
Below are examples of how TDS will be calculated for various order types (Spot/Margin etc.)
Insta Spot Sell (App) / Quickbuy Insta Sell (Web)
1% TDS is deducted on the overall transaction value.
Example: If sell value is INR 1,500, 1% TDS (INR 15) is deducted. If fee is 0.3% (INR 4.5), the user gets back (1,500 – 15 – 4.5) = INR 1,480.5.
Spot Sell – INR pairs
1% TDS is deducted on overall transaction value.
Example: If sell value is INR 1,500, we will deduct 1% of 1,500 as TDS (INR 15) and if fees are 0.3% (INR 4.5), the user will get back (1,500 – 15 – 4.5) = INR 1,480.5.
Spot Buy – Non-INR pairs (C2C)
1% TDS is deducted on the overall transaction value, on the base token.
Example: User buys 1 BTC at 40,000 USDT. 1% TDS (400 USDT) and 0.3% fees (120 USDT) are asked from the user, totaling 40,520 USDT for the transaction. Both fees and TDS are applied to the value of the transaction.
Spot Sell – Non-INR pairs (C2C)
1% TDS is deducted on overall transaction value, on the base token.
Example: User sells 1 BTC at 40,000 USDT. After deducting 1% TDS (400 USDT), the user receives 39,600 USDT.
Margin Long
1% TDS on total value of position for both opening and closing orders, including leverage.
Example: User buys 1 BTC at 40,000 USDT with 10x leverage. Margin required is 4,000 USDT, but actual transaction value is 40,000 USDT. TDS is applied on the entire 40,000 USDT (400 USDT). If the user takes a leverage position of 1 BTC at 40,000 USDT, 1% TDS (400 USDT) and 0.2% fees (80 USDT) are asked, totaling (480 USDT + margin + TDS required for selling) for the transaction. Both fees and TDS are applied to the value of the transaction. TDS for closing position needs to be taken as extra margin.
Margin Short
Same as Margin Long. User must maintain extra margin for TDS value.
Lend / Earn / Futures
No TDS is applicable.
The Finance Bill 2023
After the introduction of the TDS laws during the Union Budget 2022, during the Budget session of this year, there was a new Finance Bill that was shared. The new amendment was included in the Income Tax Act under section 271C, in the Finance Bill. It stated that non-payment of TDS would incur a penalty amount which will be equal to the unpaid TDS that will be imposed by a joint commissioner or a jail term for up to six months. In case of any delay, this can amount to an interest rate of 15% per annum for late payment.
Staying true to its customer-first approach, and working towards making TDS simpler for the crypto community, Cofinex worked out a solution to make the app TDS compliant. The app is upgraded to provide an easy-to-access crypto TDS certificate for continued seamless trading experience.
Cofinex pays the TDS on behalf of the customer.
TDS certificate, report and summary are updated on the Cofinex app itself.
Users are sent TDS statements at periodic intervals to help them keep a record while also keeping the users updated on any further developments.
To explore #TDSNotTedious, follow the following process:
Open the Cofinex App
Go to Account > Download Report
Then click on TDS Summary or TDS Certificate.
Why TDS is applicable on the buying of Non-INR pairs (C2C) unlike INR pairs (C2C)?
TDS is not applicable on the BTC-INR pair but on the BTC-USDT pair because when you buy the Non-INR pair the exchange actually first sell the base pair. For eg: If you want to buy BTC with USDT, here USDT is getting sold and BTC is getting bought.
How much TDS is applicable on margin orders with leverage?
The effective margin amount will be = margin based on leverage + Margin required for TDS. The Margin required for TDS will be 1% of the total order value while opening and closing the position. This implies that the effective margin can increase by upto 20% to account for TDS.
Let us take an example of 10x leverage of 10,000 USDT Margin order:
| Details | Before 1st July | After 1st July |
|---|---|---|
| Margin required | 1,000 USDT (approx) | 1,000 USDT (approx) |
| TDS Margin required | 0 | 200 USDT (approx) 100 USDT for opening position (approx) 100 USDT for closing position (approx) |
| Effective margin | 1,000 USDT (approx) | 1,200 USDT (approx) |
Out of which 200 USDT will be deposited to the income tax department as part of TDS regulation. This is not a loss and can be claimed back.
Here is a step-by-step look into how your Cofinex Pro app experience will be after the 1% TDS is applied. For example, if you create a Sell order for 1 BTC at INR 40,00,000 (refer to the images below), your order details will look as follows:
Order Value = INR 40,00,000
Transaction Fees (0.2% of 40,00,000) = INR 8,000
TDS applicable (1% of 40,00,000) = INR 40,000
Hence, Total Order Value (what you get) = INR 40,00,000 – (8,000 + 40,000) = INR 39,52,000
On the other hand, for all crypto-to-crypto (ie, C2C) transactions, 1% TDS will be applicable on both Buy and Sell orders. For example, if you create a Buy order for 0.5 BTC at value of USDT 20,000 (refer to images below), your order details will look like:
Order Value = USDT 20,000
Transaction Fees (0.2% of 20,000) = USDT 40
TDS applicable (1% of 20,000) = USDT 200
Total Order Value (what you pay) = USDT 20,000 + (40 + 200) = USDT 20,240
To view transaction details on individual orders:
Go to the “Orders” tab on your Cofinex App
Select the Order you want to view
Will the 1% TDS be applicable if the investor is paying 30% tax?
As per the Government regulation, 30% tax is applicable on your Crypto gains. But this tax along with the overall income tax payable based on your other sources of income can be adjusted with the TDS deducted.
You can also file for a TDS refund based on your income slabs, for more detailed information visit Income Tax India – File TDS Return.
For all your queries, click on FAQs.
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