One Indian legislator warned that the imposition of a 1% tax at source (TDS), on all crypto transactions would kill the new asset class. This tax provision is contained in Finance Bill 2022 which Lok Sabha, the lower house of India’s parliament, has passed. However, India’s finance minister insists that the TDS on crypto transactions is for tracking purposes.
A Member of Parliament raises concerns about Crypto Transactions and the 1% tax
Lok Sabha, India’s lower house of parliament, passed Finance Bill 2022 Friday which includes a proposal to tax crypto income at 30% and impose a 1% tax deducted at source (TDS) on every crypto transaction. On July 1, the 1% TDS goes into effect, while the 30% income tax starts levying in April 1.
Ritesh Pandey (Parliament member) raised concerns about the 1% TDS for crypto transactions. Lok Sabha was informed by Pandey about the impact of this tax on crypto transactions. He explained that, for example, users who buy crypto and then transfer the coins to their wallets to use them to purchase a non-fungible token, NFT, will be subject to a 1% TDS each step. He exclaimed:
It will create red tape if you have a 1% TDS for three phases. This will end this asset class which is still very young.
Indian Finance Minister Nirmala Sitharaman asserts that crypto has a 1% TDS and that it’s used to track transactions.
She said in parliament Friday: “TDS (tax deducted at source) is more for tracking. It is not an additional tax and not a new tax.” The finance minister emphasized:
The tax is one that can be tracked, and the taxpayer may reconcile it to the total tax due to the government.
Many in India’s crypto community are in agreement with Pandey, however, about the detrimental impact of a 1% TDS being imposed on crypto.
Aditya Singh is the co-founder of Crypto India Youtube channel. commented: “No loss setoff plus 1% TDS will force a lot of traders to stop day trading or to move to international exchanges & dex.” He added that “This will result in liquidity crises on Indian exchanges plus lower trading fee collection hence lower GST revenue” for the Indian government.
Nischal Shrietty was the creator of Wazirx’s cryptocurrency exchange. noted that “1% TDS is an example of killing the golden goose.” He opined:
Hoping to see this TDS reduced or eliminated by the government to support the cryptocurrency industry’s growth.
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