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How 1% TDS will be charged on your non-fungible tokens. 10 points

Non-fungible tokens (NFT) are the cryptographic assets on a blockchain that are not exchangeable because of their nature of being distinguished from each other. (istock)Premium
Non-fungible tokens (NFT) are the cryptographic assets on a blockchain that are not exchangeable because of their nature of being distinguished from each other. (istock)

  • The 1% TDS will be deducted from any Indian resident who is transferring their virtual digital assets (VDA). TDS exemption is up to 10,000 in a fiscal year applicable to any person other than a 'specified person'.

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The cryptocurrency investment in India has witnessed another taxation called tax deducted at source (TDS). Generally, TDS applies to an individual's salary, income from deposits, savings schemes, securities, and other instruments. Bringing TDS on cryptocurrencies, non-fungible tokens (NFTs), and other virtual assets is an attempt of the Indian government to tighten the bolts for trading in this market which has no regulatory backups and comes with high risk.

The 1% TDS will be deducted from any Indian resident who is transferring their virtual digital assets (VDA). TDS exemption is up to 10,000 in a fiscal year applicable to any person other than a 'specified person'.

Kameshwaran Elangovan, Co-Founder & Chief Operating Officer at GuardianLink said, as per the Income Tax law and the circulars issued by the CBDT, the co-founder said, Jump.trade being the NFT Exchange that facilitates the trade of VDAs - is required to deduct this tax from its users during trade execution. He added, "We are then required to file TDS returns with the income tax authorities."

GuardianLink has introduced Jump.trade as a global gaming NFT marketplace.

GuardianLink co-founder from an NFT point of view has given an example:

Let's suppose, an NFT sale price is $100. Including an artist fee of 5%, services fee (including GST) of 2.95%, the net sales amount of the NFT token comes at $92.05 (sales price minus artist fee and services fee. Further, 1% TDS will be implied on the net sale amount, which will be $0.92 (1% of $92.05). Taking into consideration these factors, the actual amount deposited to the user would be $91.13.

NFTs are the cryptographic assets on a blockchain that are not exchangeable because of their nature of being distinguished from each other. Simply put, they are not replaceable or interchangeable with any other cryptocurrency avenues. NFTs are packed with unique cryptographic tokens.

GuardianLink co-founder has highlighted 10 key points in his blog titled 'Tax Implications' on Jump.trade. These are:

1. 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. Jump.trade will deduct this tax and remit the amount to the tax authorities.

2. 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. 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.

4. TDS will be charged on - 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.

5. 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. Crypto exchanges like Jump Trade will remit any amount collected as TDS at the time of trade execution with the tax authorities on behalf of the user.

6. Cryptocurrency exchanges 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. 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.

8. 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.

9. 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.

10. 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.

 

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