A member of the Indian parliament has warned that levying a 1% tax deducted at source (TDS) on every cryptocurrency transaction 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.
Indian Parliament Raises Concerns Over 1% TDS On Crypto Transactions
Crypto transaction has been imposed by a 1% tax deduction at source (TDS) by Lok Sabha, India’s lower house of parliament. This came on the heels of the passed Finance Bill 2022 on Friday, which includes a plan to tax cryptocurrency revenue at 30%. 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 every crypto transaction. In the Lok Sabha, he described how the crypto industry will 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 a 1% TDS at each stage, according to him. He said:
“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.”
The 1% TDS on Bitcoin, 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 stressed that:
“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 agree with Parliament Member Pandey that placing a 1% TDS on crypto will have a detrimental impact.
“No loss setoff + 1% TDS will push a lot of traders to halt day trading or to transfer to international exchanges & 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. He expressed his opinion as follows:
“Hope to see the government revisit this and reduce or eliminate this TDS to help the crypto industry grow further.”
