Sell-Off Pressure Doubles Down on Indian Crypto Players as They Embrace TDS Rules
Indian crypto players have decreased trading activities in crypto exchanges post-TDS rules
It is high time for that the Indian crypto players or crypto investors to embrace the new TDS rules on the highly volatile crypto market. Finance Minister Nirmala Sitharaman introduced the 1% TDS (Tax Deducted at Source) on the transfer of any virtual digital assets like cryptocurrency and NFTs in the crypto market. Thus, this TDS rule is set to come into effect from July 1, 2022, especially for transactions of over Rs. 10,000 for aspiring crypto investors. This has triggered a sell-off pressure that is further doubling down on Indian crypto investors from July 1, 2022.
TDS will be implied and is necessary at the time of the credit of over Rs. 10,000 to the resident account or the payment time, whichever is done earlier by Indian investors. There are four changes in the TDS rules that are to be noted by the investors. The CBDT (Central Board of Direct Taxes) has issued a detailed guideline on cryptocurrency and NFTs and cleared the confusion for Indian crypto players.
The CBDT circular issued that the TDS on the transfer of cryptocurrency and NFT will be applicable if the amount paid by a buyer exceeds Rs. 50,000 during the financial year or the amount paid by any other person or buyer apart from the buyer mentioned above exceeds Rs. 10,000 during the financial year.
Four new changes in the TDS framework that investors should note
If there is no involvement of a crypto exchange then Indian crypto players must deduct tax under the given section. It is necessary to clarify that the TDS is to be considered for the transfer of cryptocurrency or NFT excluding the GST.
Transactions through a crypto exchange
When there are transactions in the crypto market through a broker or a crypto exchange the tax may be deducted only by the exchange that will be credited or made payable to the seller.
If the crypto or digital assets are owned by the crypto exchange
The crypto exchange must enter into a written agreement with the Indian crypto investors that they will pay the necessary tax with all transactions in the crypto market. Indian crypto investors should deduct the TDS if the cryptocurrency is owned by any crypto exchange.
Crypto to crypto transactions for crypto investors
For the crypto-to-crypto transactions in the highly volatile crypto market, TDS should be deducted in cryptocurrency only. It should be converted into INR by the end of the same day at 11.59 pm.
It is quite evident that Indian crypto players need to keep these pointers in mind while completing crypto transactions in the highly volatile crypto market. The largest crypto exchanges in India such as WazirX and CoinDCX have observed a drastic decrease in trading volumes in India. The sell-off pressure has risen tremendously after the imposition of a 30% capital gains tax on digital assets, along with the 1% TDS. There is speculation that India is set to levy a 28% GST on cryptocurrencies and NFTs in the nearby future.
It is known that transaction fees are a major source of income for all crypto exchanges in the market. But the drastic drop in the trading volume from Indian crypto players has caused an additional problem for Indian crypto exchanges in 2022. The new TDS regulation can decelerate the INR deposits on multiple crypto exchanges. Indian crypto exchanges have also reduced their non-critical costs.
Thus, the implementation of new TDS rules on cryptocurrencies and NFTs has created an impact on the sell-off pressure in the crypto wallets of Indian crypto investors.