The call to reduce the tax deduction at source (TDS) on crypto transactions is intensifying among the crypto ecosystem players in India. The Union budget for 2022-23 has approved a 1% TDS on virtual digital assets. Calling this too high as it can drive traders away from the market and hurt volumes, industry representatives are calling for lowering it in the range of 0.01% to 0.05%.
Unocoin and CoinDCX CEOs Call for TDS Reduction
Sathvik Vishwanath, co-founder and CEO of one of the oldest Indian crypto exchanges, Unocoin (2013), said Tuesday in a cheep, “Nowadays I meet traders leaving India just because they can’t tolerate TDS. The government is not going to get revenue this way. Even for the government, it should be a volume game.”
Last week, Sumit Gupta, Co-Founder and CEO of CoinDCX, now the highest value crypto firm in India, said:
“In the industry, we are engaged with the government and have put forward a presentation on how 30% tax and more than that, 1% TDS is detrimental to the growth of the industry. It will lock up capital for traders and suck up liquidity from the market. If there is no liquidity, retail investors will suffer.”
Meanwhile, the government is planning a tougher tax environment for crypto businesses. Last week, the media reports suggested that the Indian tax authorities plan to place crypto activities under the higher slab of 28% GST, usually reserved for non-essential and luxury activities such as betting, gambling and horse racing.
“We will try to keep it simple on our end, but we still continue to engage and keep the dialogue open with the government asking them to lower the TDS to 0.01 or 0.05 percent. The 30 percent income tax is also on the higher side, and we’re asking them to lower it,” Gupta added.
Income tax, TDS on crypto activities
Budget 2022-23 brought some much-needed clarity on taxes on crypto earnings and transactions. A capital gains tax of 30% is levied on profits made on crypto transactions with no provision to offset losses. The tax rate is the same as that applied to income from speculative transactions such as horse racing.
It also proposed a 1% TDS on payments over Rs 10,000 (approx. US$125) made for the acquisition of virtual digital assets in a fiscal year. The threshold is raised to Rs 50,000 (approx. $725) for individuals and families who are required to audit their accounts under the IT Act. The capital gains tax took effect from April 1, while the TDS will apply from July 1, 2022.
During the debate on the budget proposals in March, some MPs noted that poor regulation of cryptocurrencies will cause an exodus of innovation. These comments turned out to be prophetic as, within the first ten days of the new fiscal policy, trading volume on major exchanges dropped significantly.
This, coupled with the denial of UPI instant retail payment services to crypto exchanges by regulators, added to the turmoil, leading to INR trading being shut down on Coinbase, WazirX, and CoinSwith Kuber.
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This post Representatives of the Indian crypto industry call for a reduction in certain tax rules Representatives of the Indian crypto industry call for a reduction in TDS
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