So, selling $BTC and withdrawing INR are two different processes. A user who has sold $BTC for $USDT has made a crypto trade but has not yet withdrawn Indian rupees. Before the $USDT can be transferred to a bank account, it needs to be sold or converted via a supported route.
Depending on the exchange, the conversion and withdrawal functionality may vary for Indian users. Some platforms offer an INR balance and bank withdrawal option, and other ones may require peer-to-peer transactions or other payment methods that are supported.
Can I Send That Money Directly to My Bank Account?
Typically, if the exchange offers INR withdrawal, the process begins after you’ve sold the cryptocurrencies and the funds become available in INR. The user chooses which withdrawal option to use, specifies a bank account that has been verified, sets the amount, and submits the request.
The payment is then processed by the exchange via their banking or payment partner. Once the transfer is completed, the INR appears in the user’s bank account.
The key difference is that the exchange does not deposit Bitcoin or $USDT into your bank account. Crypto must first be converted to INR, after which the INR withdrawal is processed via the payment or banking rails supported by the exchange.
In addition, the exact withdrawal method, processing time, and supported banks can vary between Indian exchanges.
Why Does the Exchange Ask for KYC?
Know Your Customer verification, also known as KYC, enables an exchange to verify who is utilizing the account. All Indian crypto exchanges subject to the country’s virtual digital asset reporting framework must follow anti-money laundering regulations, such as customer identification and transaction monitoring.
In most cases, crypto users are required to provide identity and tax-related data and complete verification steps as mandated by the platform.
The goal is simple: the exchange must know who owns the account, track transactions, and identify transactions that may need further investigation. The requirements are all part of the broader AML compliance regime, which is regulated via India’s financial intelligence and anti-money laundering system.
Can I Withdraw to My Friend’s or Family’s Bank Account?
Normally, users can only withdraw funds to bank accounts that have been verified in their own names and are in accordance with the exchange’s rules.
This is significant because exchanges rely on KYC information to determine the account owner. If there is a discrepancy between the identified customer and the bank account that is receiving the funds, this may lead to withdrawal failure or further compliance investigations.
The same rule applies to payment accounts for supported P2P transactions. Exchange rules may also prohibit payments to third parties, so users should not expect to immediately transfer the crypto proceeds to a friend’s or family member’s bank account.
Why Can an Exchange Hold My Withdrawal?
A withdrawal can be delayed if an exchange is required to complete extra verification or transaction monitoring prior to releasing the funds.
Examples include missing or incomplete KYC information, mismatched bank details, unusual transaction activity, or questions about the source of funds. An exchange may also request additional documents if the deal is significant or doesn’t align with the account’s previous activity.
Problems can also occur outside the exchange’s compliance system. Banking or payment-rail failures, rejected transfers, and incorrect account information can cause a delay in final credit to INR.
These checks do not necessarily mean the funds have been lost. In many instances, the exchange is waiting for information or confirmation from a payment system before processing the withdrawal.
Do I Pay Tax When I Withdraw?
For tax purposes, the actual bank withdrawal is not equivalent to the crypto withdrawal. The tax provisions of the VDA in India are applicable to the income generated from the transfer of a Virtual Digital Asset. For instance, if a person sells Bitcoin at a gain, the tax question arises from that crypto transfer rather than simply from moving the resulting INR from an exchange to a bank account.
The applicable Indian tax rate for VDA income is 30%, which includes applicable surcharge and health and education cess, if applicable. A TDS of 1% will also be applicable on qualifying VDA transfers, subject to the applicable limits and conditions of the TDS rules in India.
Therefore, Indian crypto users should not consider the bank withdrawal as a second crypto sale. Crypto transactions and subsequent movement of INR to a bank account are two different processes.
What Should I Keep as Proof?
Anyone selling crypto should keep records showing the full path from the original transaction to the final bank payment.
That includes trade history and order records, crypto deposits, withdrawals, transaction IDs, INR conversion records, and bank statements showing the final credit. When completing P2P transactions, users should also keep the relevant order information and payment records.
Tax records are also crucial. Keep the information needed to calculate the cost of acquisition, sale proceeds, and resulting VDA income, along with records of any TDS reflected in the relevant tax statements.
This complete paper trail simplifies the process of explaining the source of the money, how the Crypto was sold, how much INR was received, and how it was treated from a tax perspective.
Related: Binance P2P in India: Why Sellers Risk Bank Account Freezes
