For Indian tax residents, the sale/transfer of Virtual Digital Assets (VDA/Crypto) will be subject to tax deduction at source (TDS) at the rate of 1% effective 1st July 2022, as per the Finance Act 2022. This tax, deducted at source, can be adjusted against your overall tax liability at the time of filing your annual income tax return
The tax deducted at the origin of a transaction is called TDS. This tax is deducted at the time of transaction from the buyer and remitted to the government on behalf of the seller
As per the Income Tax Act, FanCraze is required to deduct this tax from users during trade execution. We are then required to file TDS returns with the income tax authorities. Please note that TDS is applicable only for sell transactions and not on buy transactions
To ensure transparency, FanCraze will provide you with a weekly transaction report containing a break-up of the total TDS withheld on your transactions. FanCraze will also provide users with a Form 16A certificate for TDS deductions once every quarter
- What is TDS?
Tax Deducted at Source (TDS) is an advance tax collected at source by the Indian government to establish a trail of transactions. Under this system, tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the tax authorities by the payer on behalf of the payee. Effective 1st July 2022, 1% TDS is applicable on the sale/transfer of virtual digital assets (VDA/Crypto). FanCraze will deduct this tax and remit the amount to the tax authorities
- When is TDS deducted?
TDS is applicable for the sale/transfer of Virtual Digital Assets (VDA/Crypto). FanCraze will deduct the amount when the transaction is executed. The remaining amount will be deposited in your FanCraze wallet account after deducting the applicable fee and other charges
- Should I deposit TDS with the tax authorities?
FanCraze 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 your income tax return
- Will I get any TDS reports?
FanCraze will provide users with a transaction report with a detailed break-up of amounts deducted, including TDS and fees withheld, for each order. Further, FanCraze will provide users with TDS certificates (Form 16A) for every quarter. The certificate will contain the details of the TDS deducted by FanCraze for the quarter
- How do I access my transaction report?
Your transaction report with the TDS will be sent once a week on your registered email id and alternatively a csv can also be downloaded from your profile
- Will TDS be reflected in the income tax department's Form 26AS?
Yes, TDS will be reflected on Form 26AS. Further, FanCraze will provide users with a Form 16A every quarter, which will contain the details of the TDS deducted for the sale or transfer of virtual digital assets
- How is the 1% TDS calculated?
If an Indian tax resident sells an NFT, we will credit their FanCraze account after deducting marketplace fees and TDS. The transaction report will also include the exchange rate (INR/$) at the time of sale
Consider the following example:
NFT Listed Price = $100 (A)
Marketplace Fee = $7 i.e. 7% of the listing price (B)
Net Sale Amount = (A) - (B) = $100 - $7 = $93
1% TDS will be applicable on the net sale amount i.e. 1% of $93 = $0.93 (C)
The actual amount deposited to the user’s account will be: (A) - (B) - (C) = $100 - $7 – $0.93 = $92.07
- Is there a cap on TDS? Is the TDS the same for a transaction of $10 and $1000 ?
TDS is calculated as a percentage of the net sale amount of the transaction
For a trade with net sale amount $100, TDS will be 1% of $100 = $1
For trade with a net sale amount $1000, TDS will be 1% of $1000 = $10
- 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 return
- 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
- How is TDS different from 30% capital gains tax?
TDS is an advance tax to establish a trail of transactions. This tax can be adjusted against your total tax liability. For virtual digital assets, users are liable to pay 30% capital gains tax, plus applicable surcharge and cess, on gains (profits) at the time of filing their income tax return
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