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Ramalingam

Ramalingam Kalirajan  |3744 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 22, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Jan 10, 2024Hindi
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Hi Sir, I am planning to buy crypto tokens in FY 2023-24. As per the tax law, I have to pay 1% TDS which will be debited by the crypto exchange. when I sell my crypto tokens in any of the subsequent financial years, I will have to pay 30% tax on the profit (plus surcharge). I wanted to know how will this 1 % surcharge be adjusted when I sell my cryptos in coming years? Or will I have to pay 1% this financial year and additional 30% taxes (plus surcharge) when I sell my cryptos. Kindly clarify the matter. Thanks in advance.

Ans: You're right about the crypto tax regulations in India for FY 2023-24. Here's a breakdown of how the 1% TDS and 30% capital gains tax work:

1% TDS on Crypto Purchase:

This 1% Tax Deducted at Source (TDS) applies when you buy crypto tokens exceeding a certain limit (?50,000 per year or ?10,000 in specific cases) through a crypto exchange in India.
It's deducted by the exchange itself and deposited with the government.
30% Tax on Capital Gains:

This tax applies when you sell your crypto tokens for a profit (selling price > buying price).
You'll need to pay 30% tax (plus applicable surcharge and cess) on the capital gains earned.
Important Note: Unlike stocks, there's no distinction between short-term and long-term capital gains for crypto. So, the entire profit is taxed at 30%.
How the 1% TDS is Adjusted:

The 1% TDS you pay doesn't directly get deducted from your capital gains tax.
It acts as a pre-payment towards your overall tax liability.
When you file your income tax return, you can claim credit for the 1% TDS deducted at the time of purchase. This will reduce your total tax payable.
Here's an example:

You buy Rs.1 lakh worth of crypto tokens and the exchange deducts 1% TDS (Rs.1,000).
Later, you sell these tokens for Rs.1.2 lakh, making a capital gain of Rs.20,000.
You'll need to pay 30% tax (plus surcharge and cess) on Rs.20,000 (capital gains).
However, you can claim credit for the Rs.1,000 TDS already deducted.
This will reduce your final tax liability.
Word of Caution on Crypto Investment:

It's important to be aware of the high volatility associated with cryptocurrency investments. The value of your tokens can fluctuate significantly, leading to potential losses.
Unlike stocks, the Indian government doesn't regulate cryptocurrencies. This means your investment isn't protected by any regulatory bodies.
Recommendation:

While crypto can be a high-risk, high-reward investment opportunity, it's wise to carefully consider your risk tolerance and conduct thorough research before investing. There are established and regulated investment options available that might better suit your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |3744 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 03, 2024

Asked by Anonymous - Jan 10, 2024Hindi
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Money
Hi Sir, I am planning to buy crypto tokens in FY 2023-24. As per the tax law, I have to pay 1% TDS which will be debited by the crypto exchange. when I sell my crypto tokens in any of the subsequent financial years, I will have to pay 30% tax on the profit (plus surcharge). I wanted to know how will this 1 % surcharge be adjusted when I sell my cryptos in coming years? Or will I have to pay 1% this financial year and additional 30% taxes (plus surcharge) when I sell my cryptos. Kindly clarify the matter. I look forward to your response.
Ans: Your inquiry reflects a responsible approach to understanding the tax implications of investing in cryptocurrencies. The 1% TDS (Tax Deducted at Source) levied by the crypto exchange is an advance tax payment, akin to a prepayment of your tax liability on the profit from cryptocurrency transactions.

When you sell your crypto tokens in subsequent financial years, the 1% TDS already deducted will be adjusted against your final tax liability. Therefore, you won't have to pay the 1% TDS again when you sell your cryptos.

However, it's important to note that the profit from cryptocurrency transactions will be subject to a 30% tax (plus surcharge) when you sell them in the future. This tax will be calculated on the gains made from your crypto investments, after deducting any allowable expenses or losses.

To ensure compliance with tax regulations and maximize your tax efficiency, consider consulting with a tax advisor or a Certified Financial Planner. They can provide personalized guidance based on your financial circumstances and help you navigate the complexities of cryptocurrency taxation.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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