With tax deducted at source (TDS) at one percent and 30 percent on crypto gains introduced during the Union Budget 2022-23, and damning statements made by RBI Governor, deputy governor and finance minister, the end of crypto industry’s worries is nowhere in sight.
Consequently, the cryptocurrency industry representatives appealed to the finance government recently to re-consider the tax proposals. During the Budget speech, Finance Minister Nirmala Sitharaman announced to levy 1 percent TDS and 30 percent on crypto gifts and remuneration to employees in digital currencies.
The industry leaders argued that the levy of TDS would be unfeasible to comply with.
These issues came to light when these industry spokespersons met the finance ministry on Feb 11, Economic Times reported.
It was reported by Coindesk that the industry officials met a day prior to this as well.
Apart from the one percent TDS, crypto exchanges are also worried over the 30 percent tax on all crypto investment gains. Nevertheless, the reduction of the tax rate is a secondary priority, reported Coindesk.
As a matter of fact, crypto exchanges are also constituting a formal and detailed proposal with the help of an industry body, the Blockchain and Crypto Assets Council (BACC), and the big four auditing firms. BACC — part of the Internet and Mobile Association of India — has been spearheading consultations with the government on behalf of crypto exchanges and the industry.
The framework is being created to convince the government to exclude the 1 percent TDS clause from the finance bill. “The Finance Ministry is open to talks and has asked for a formal proposal,” said a person familiar with the matter, reported Coindesk.
Early this month, the crypto industry held a meeting to discuss the TDS issue. The key takeaway was that levy of TDS can discourage small traders and there could even be a shift towards decentralized exchanges.
These tax proposals have received flak from most industry leaders as some of them called for crypto tax ban through social media messages including CoinDCX’s Sumit Gupta and WazirX’s Nischal Shetty.
However, the larger question that arises is whether these efforts of knocking on the finance ministry’s doors would lead to anything worthwhile.
Anoush Bhasin, founder of Quagmire Consulting, cryptocurrency tax advisory firm says: “Tax laws, historically, have been subject to amendment based on industry feedback, implementation challenges and loophole identification. The Government is likely to consider the view of industry participants and weigh its options if there seem to be glaring issues in the original provisions. While the 30 percent flat tax is excessive, I believe the bigger issue is implementation of the one percent TDS on each trade. It remains to be seen how amendments of these provisions will pan out but the industry is hopeful to have a constructive dialogue with the Government to push this ecosystem ahead.”
Whether government offers any relief to crypto industry to incentivise trading in crypto transactions is a question that hangs in balance until there is a full-fledged cryptocurrency regulation framework in India.