MP expresses concern over the 1% TDS on cryptocurrency transactions

MP expresses concern over the 1% TDS on cryptocurrency transactions

 

A member of the Indian parliament has warned that levying a 1% tax deducted at source (TDS) on all cryptocurrency transactions will eliminate the young asset class. This tax provision was included in the Finance Bill 2022, which was enacted by the Lok Sabha, India's lower house of parliament. The TDS on crypto transactions, on the other hand, is for tracking purposes, according to India's finance minister.

In response to concerns in the Rajya Sabha about cryptocurrency taxation and legalisation, FM Nirmala Sitharaman said that while "earnings coming from transactions related to cryptocurrency have been taxed," "nothing has been done, at this time, to legalise, outlaw, or de-legalize it."

While presenting the budget, Union Finance Minister Nirmala Sitharaman placed a 30% tax on private digital assets. The administration did so despite the RBI's repeated public warnings against crypto assets. The RBI raised various concerns about private cryptocurrencies in its Financial Stability Report (FSR) released on December 29. The FSR listed various negative consequences of the instruments. Such as urgent threats to client safety, anti-money laundering (AML), and counter-terrorist financing (CFT).

On Friday, India's lower house of parliament, the Lok Sabha, passed Finance Bill 2022, which includes a plan to tax crypto income at 30% and levy a 1% tax to be deducted at source (TDS) on all crypto transactions. The 1% TDS will be implemented on July 1st, whereas the 30% income tax will be implemented on April 1st.

Ritesh Pandey, a member of Parliament, expressed concern over the 1% TDS on cryptocurrency transactions. In the Lok Sabha, he described how the crypto industry would be suffocated by this tax. For example, if a user purchases crypto, then transfers the coins to a wallet, and then uses the coins to purchase a non-fungible token (NFT), the user will be charged 1% TDS at every stage, according to him. He exclaimed,

It will encourage red tapeism when the 1% TDS is applied in three stages. This will also bring an end to this asset class, which is still relatively new. The 1% TDS on cryptocurrency, according to Indian Finance Minister Nirmala Sitharaman, is for tracking purposes and is nothing new.

"TDS (tax deducted at source) is more for tracking," she remarked in parliament on Friday. It is neither a new nor an additional tax.The finance minister highlighted that taxes will assist people in tracking it, but the taxpayer may always reconcile it with the overall tax due to the government.

It is also notable that many members of India's crypto community also confer with the views of Parliament Member Pandey. They agree that a 1% TDS on crypto will certainly have a detrimental impact.

"No loss set off plus 1% TDS would push a lot of traders to discontinue day trading or transfer to international exchanges and Dex," Aditya Singh, co-founder of the Crypto India YouTube channel, said.

"This will result in liquidity crises on Indian exchanges as well as lower trading fee collection, resulting in lower GST revenue," he warned.

"1 percent TDS is an example of strangling the golden goose," said Nischal Shetty, the founder of cryptocurrency exchange Wazirx. 'Hope to see the government examine this and decrease or eliminate TDS in order to assist,' he said.