A member of India’s parliament has warned that applying a 1% tax deducted at source (TDS) on all cryptocurrency transactions will effectively extinguish the nascent asset class. This tax provision is found in Finance Bill 2022, which was enacted by the Lok Sabha, India’s lower house of parliament. India’s finance minister, on the other hand, maintains that the TDS on cryptocurrency transactions is for tracking purposes.
A Member of Parliament Expresses Concerns About the 1% TDS on Crypto Transactions
The Lok Sabha, India’s lower house of parliament, passed Finance Bill 2022 on Friday, which includes a plan to tax cryptocurrency revenue at 30% and levy a 1% tax deducted at source (TDS) on all cryptocurrency transactions. The 1% TDS will take effect on July 1, while the 30% income tax will take effect on April 1.
Ritesh Pandey, a member of Parliament, expressed concern over the 1% TDS on cryptocurrency transactions. He detailed in Lok Sabha how this tax will decimate the cryptocurrency business. For instance, he stated that if a user purchases cryptocurrency, then transfers it to a wallet and uses it to purchase a non-fungible token (NFT), the user will incur a 1% TDS at each stage. He cried out:
When you impose a 1% TDS at three stages, it will give birth to red tapism. Doing so will also finish this asset class, which is very young.
However, Indian Finance Minister Nirmala Sitharaman argues that the 1% TDS on cryptocurrency is not new and is for tracking purposes.
“TDS (tax deducted at source) is more for tracking,” she stated in parliament on Friday. It is not a new tax, nor is it an additional tax.” The finance minister made a point of emphasizing:
It is a tax that will help people track it, but at the same time the taxpayer can always reconcile it with the total tax to be paid to the government.
Nonetheless, many members of India’s crypto community concur with Parliament Member Pandey regarding the harmful impact of placing a 1% TDS on crypto.
Aditya Singh, co-founder of the Crypto India Youtube channel, commented: “Without a loss setoff and a 1% TDS, a lot of traders may be forced to halt day trading or go to international exchanges and services.” He continued, “This will result in liquidity crises on Indian exchanges, as well as decreased trading fee collection, resulting in decreased GST revenue for the Indian government.”
Nischal Shetty, the founder of cryptocurrency exchange Wazirx, stated that “1% TDS is a case of murdering the golden goose.” He stated:
Hope to see the government revisit this and reduce or eliminate this TDS in order to help the crypto industry grow further
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.