I Am Trading Cryptocurrencies Recently. If My Receipts Of Sale Of Crypto Currencies Exceeds 1 Crore. Will I Be Liable For Tax Audit? Also Is There Any GST Applicable On Sale Of Crypto. Kindly Give Your Guidance.

Ans: In case of crypto to cryto transaction, TDS is applicable even at the time of acquisition and same can me claimed in the year of deduction. If the crypto are acquired by paying amount, no TDS will be applicable.

Thus, when you are buying one type of crypto by transferring another, tax is levied even on transfer of original crypto.

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.

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

Ans: 1% TDS is on transfer of virtual digital asset and credit will be given to seller, not to buyer. Thus, question of adjustment doesn't arise. Tax of 30% is applicable on transfer of virtual digital asset.

TDS will be applicable on both buyer and seller at 1% in Crypto-to-Crypto transactions only.