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$5000 at USDT/INR rate on the date of sale will be taxed as per normal taxable rates whereas $2000 at USDT/INR rate will be taxable at 30% under section 115BBH.
Will 1% TDS be applied on $2000 component only or on the total of $7000?
1% TDS will be applicable on the total $7000. This is very important point. I missed it in my post above. When you sell crypto on Exchanges, the whole amount is considered as the transfer. So while showing the amount of consideration u/s 115BBH, you are required to show the whole amount $7000 but you can show $5000 as the cost of acquisition, hence the net amount chargeable to tax u/s 115BBH will be $2000.