The cryptocurrency industry has reportedly urged the Centre to take a nuanced approach towards imposing a 1 per cent TDS (tax deducted at source) on virtual digital asset transactions, mentioning it will be tough to comply with.
Plus, the industry asked the finance ministry to relook at 30 per cent tax on income from transactions in crypto assets, saying the tax is levied without waiting for the receiver to sell it and book any profit.
On Friday, representatives of leading domestic crypto exchanges discussed the issues with officials of North Block—headquarters of the Union finance ministry. They gave their representation on some of the key concerns.
Presenting her fourth Union Budget on February 1, Finance Minister Nirmala Sitharaman proposed a 30 per cent tax on gains made from any virtual digital assets from April 1. The budget has also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient.
Industry experts are of the view that crypto-assets taxation required more deliberation before implementation as the budget proposals lack clarity on many issues.
“They are not banning crypto but killing it with tax compliance. TDS is technically not feasible as tracking down identity becomes difficult,” a crypto industry official familiar with the matter told ET on condition of anonymity.
He went on add that the buyer of a cryptocurrency has to deduct 1 per cent TDS and deposit the amount as an advance tax to the government on behalf of the seller. This would be thorny to observe in situations where assets are being purchased from a non-resident seller and domestic exchange only enables supply from foreign exchange.
On Thursday, Reserve Bank of India Governor Shaktikanta Das reiterated that private cryptocurrencies are a threat to macroeconomic and financial stability. His remarks come after the Budget 2022-23 proposed a 30 per cent tax on gains made on crypto assets from the financial year beginning April 1.
The financial daily quoted Homi Mistry, partner at Deloitte India, as saying, “In a case where the consideration is in kind, the provision says the payer is responsible to make sure that the TDS is duly deposited.” However, how this will be implemented is yet to be seen, he added.
Seeking clarity on certain issues, industry insiders mentioned how it will apply in several other transactions., for instance, when there is an exchange of one sort of digital asset with another (barter) sans any cash.
Saurrav Sood, practice leader, international tax, at professional services firm SW India, told the publication: “The introduction of crypto tax under the income-tax regime is nothing less than a knee-jerk reaction to tax a fast-building parallel ecosystem currency.”
