Crypto 1% TDS deduction on WazirX exchange

1% TDS on Wazirx

  • Cryptocurrency TDS Deduction on WazirX: With a 1% TDS Rule for Cryptocurrency Trades Effective on July 1, Indian Cryptocurrency Exchanges Have Started Rolling Out it on their platform.

Indian crypto exchanges have begun implementing the 1 percent TDS rule for cryptocurrency transactions on their systems as of yesterday (July 1), when it went into force. WazirX, a prominent cryptocurrency exchange in India, has also adopted the TDS guideline.

“We are complying with the government’s directive on 1% TDS and the updates on our exchange and P2P platforms went live yesterday. The new update will ensure that tax deductions are transparent to keep users informed of taxation throughout the crypto buying experience,” Rajagopal Menon, Vice President at WazirX, told FE Online. 

“We are complying with the government’s directive on 1% TDS and the updates on our exchange and P2P platforms went live yesterday. The new update will ensure that tax deductions are transparent to keep users informed of taxation throughout the crypto buying experience,” added. 

Rajagopal described the TDS deductions on WazirX in detail in a memo that he shared with FE Online. According to him, established procedures are in place to collect TDS for pertinent transactions.

The TDS collected must first be remitted in INR to the Income Tax Department. Any TDS gathered in the form of Crypto must be translated to INR for this.

In Crypto to Crypto transactions, the TDS for both sides would be subtracted from the quotation (or primary) Crypto asset to facilitate conversion and minimize price slippage.

The four quotation assets available on WazirX markets are INR, USDT, BTC, and WRX. For instance, BTC is the quote cryptocurrency asset in the following markets: MATIC-BTC, ETH-BTC, and ADA-BTC; as a result, the TDS of both the buyer and seller dealing in these markets would be deducted in BTC.

TDS on crypto-INR and crypto-crypto exchange: Examples

INR markets

1 BTC traded for 100 INR. BTC seller receives 99 INR (after 1% TDS deduction). BTC buyer receives 1 BTC (no TDS deducted)

Crypto-Crypto markets

1 BTC sold for 10 ETH. BTC seller receives 10 ETH by paying 1.01 BTC (after 1% TDS addition). BTC buyer receives 0.99 BTC (after 1% TDS deduction)

P2P trade

In P2P trades, 1% TDS would be deducted before a USDT sell order is placed. Therefore, no TDS has to be paid by the P2P USDT buyer.

For Example:

  • A seller places a purchase order for 100 USDT. A sell order would be put in for 99 USDT after the 1% TDS deduction. The buyer would pay 99 USDT and then transfer the matching INR to the seller's bank account.
  • If only a portion of the 99 USDT is successfully sold, only 1% TDS will be taken out, and the remaining 1 USDT locked for TDS will be refunded to the seller upon order cancellation.

TDS Consequences

According to Rajagopal, it is currently too early to estimate the effects of TDS.

“We will be in a better position to understand this by the second week of July. Our focus is more on adhering to the new taxes rules and meeting the required standards that are being set. There has been a fall in trading across the industry as investors shift to hold and there may be another dip as traders see their capital getting locked while trading on KYC-compliant Indian exchanges,” he said.

Note: (Cryptos and other virtual digital assets are unregulated in India. They are considered extremely risky for investment. Please consult your financial advisor before making any investment decision)