The sale/transfer of Virtual Digital Assets (VDA/Crypto) will be subject to tax deduction at source (TDS) at a rate of 1% effective 1st July 2022, per the Finance Act 2022. 

The tax deducted at the origin of a transaction is called TDS. This is deducted by the buyer at the time of payment to the seller and is further remitted to the Government on behalf of the seller. This tax, deducted at the source, can be adjusted by the seller against their overall tax liability at the time of filing their annual income tax returns. 

As per the Income Tax law and the circulars issued by the CBDT, Jump.trade, being the NFT Exchange that facilitates the trade of VDAs, is required to deduct this tax from its users during trade execution. We are then required to file TDS returns with the income tax authorities. 

FAQs:

1. What is TDS?

Tax Deducted at Source (TDS) is a means of collecting taxes on the income at the time of the transaction itself. This is deducted by the buyer and deposited with the Government on behalf of the seller. At the time of filing income tax returns, the seller can avail of the tax previously deducted and set it off against their tax liabilities.

Effective 1st July 2022, 1% TDS is applicable on the sale/transfer of virtual digital assets (VDA/crypto) for users who are under the Indian Income Tax Act, 1961. Jump.trade will deduct this tax and remit the amount to the tax authorities.

* If you have listed the NFTs for sale before the 1st of July 2022, but the trade happens on or after the 1st of July 2022, the TDS provisions will apply.

2. When is TDS deducted?

TDS is applicable for the sale/transfer of Virtual Digital Assets (VDA/Crypto). Jump.trade will deduct the amount when the trade is executed.  The remaining amount will be deposited in your account after deducting the applicable commission and other charges.

3. How will Jump.trade facilitate TDS implementation? 

For transactions done on/via Jump.trade, TDS is deducted wherever applicable. Then the balance amount is credited to your Jump.trade wallet. You can find the details of the TDS deduction in the invoice. TDS will be charged as below:

Note:

1. Buyers in India who transact in cryptocurrency (to buy VDAs) will be charged 1% TDS on the transaction amount.
2. Sellers in India who transact either in cryptocurrency or in fiat currency (to earn from selling their VDAs) will be charged 1% TDS on the transaction amount. 

Example:

NFT Sale Price = $100 (A)

‍Artist Fee = 5% (B) & Service Fee (Incl. GST) = 2.95% (C)

‍Net Sale Amount = (A) – (B) – (C) = $100 – $5 – $2.95 = $92.05

1% TDS will be applicable on the net sale amount i.e. 1% of $92.05 = $0.92 (D)

‍The actual amount deposited to the user’s jump.trade wallet will be: (A) – (B) – (C) – (D)= $100 – $5 – $2.95- $0.92 = $91.13

* Combinations of both crypto and fiat currencies transactions will attract 1% TDS on the entire transaction value

4. Should I deposit TDS with the tax authorities? 

Jump.trade will remit any amount collected as TDS at the time of trade execution with the tax authorities on behalf of the user. Details of TDS from various sources of income can be viewed on your Form 26AS statement. This amount can be adjusted against your gross tax liability at the time of filing the income tax return. 

5. Will I get any TDS reports? 

Jump.trade will provide users with an invoice with a break-up of amounts deducted, including TDS and fees, for each order after the sale has been executed and recorded in the database.

7. Will TDS be reflected in the income tax department’s Form 26AS?

Yes, TDS will be reflected in the seller’s Form 26AS. 

8. I am not liable to pay tax. Will TDS be applicable? 

TDS is applicable for all sell transactions, irrespective of the Income tax basic exemption. However, you can adjust the TDS against your tax liability at the time of filing your annual tax returns. 

9. When can I claim a refund of TDS? 

Users can claim a refund of the TDS deducted at the time of filing their annual income tax returns if the total tax liability at the end of the year is zero or less than the amount deducted as TDS. 

10. How is TDS different from 30% gains tax? 

TDS is a tax withheld at the source at the point of the transaction itself. This tax can be adjusted against your total tax liability. TDS under Section 194S would be deducted by the buyer at the time of remittance of consideration to the seller.

For the transfer of virtual digital assets (cryptos, NFTs, etc.), users are liable to pay tax at 30% under Section 115BBH, plus applicable surcharge and cess, on capital gains (profits) at the time of filing income tax returns. This would be done on a self-assessment basis.