The outcry from crypto traders and investors went unheard after Indian finance minister Nirmala Sitharaman failed to revise the controversial 1 percent TDS collection on each crypto transaction. In the last nine months, this TDS collection has said to have fetched over $19 million (roughly Rs. 157 crore) to the government treasury. The detail was disclosed to the Parliament recently by Pankaj Chaudhary, who is the Minister of State for Finance in the country. The data tracks ten months since the TDS law went live last July in India.
“Direct tax collected by way of tax deducted at source under section 1945 of the Income-tax Act, 1961, on payments made upon transfer of Virtual Digital Assets, aggregates to Rs. 157.9 crore upto 20/03/2023 for FY 2022-23,” Chaudhary said in a written update to the Upper House.
Indians, last June, began to see one percent tax deductions on each crypto transaction. This essentially means that one percent TDS is being levied on every step around the purchase, trade, and deposit of crypto assets.
Not just on cryptocurrencies, this one percent TDS is also be charged on the transactions of other VDAs as well, such as non-fungible tokens (NFTs) and other metaverse elements.
Between June and November last year, the TDS collection from crypto transactions reportedly amounted to $7.4 million (roughly Rs. 60 crore), Chaudhary had informed at the time.
In the last five months, this amount has spiked by $11.6 million (roughly Rs. 95 crore) — indicating a rise in crypto transactions in India.
Time and again, members of India's crypto community have urged the finance ministry to revisit the 1 percent TDS and consider reducing it to promote the growth of the overall crypto sector.
In a tweet, Sathvik Vishwakarma, the CEO of Unocoin crypto exchange reacted to Chaudhary's disclosure, calling the TDS rule a distraction in the growth of the digital assets industry in India.
The government of India believes that by imposing one percent tax deducted at source (TDS) on each crypto transaction, it would be easier to keep a track of them despite the element of anonymity that crypto transactions entail.
The crypto community in India is set to surpass the US, UK, Russia, and Japan in terms of adoption this year. As per a recent report by Statista, India's crypto community is expected to envelop over 156 million users by the end of 2023.
Amid the expansion of the sector, the government of India, via its tax laws around crypto, is looking to curb any potential abuse of digital assets for illegal activities like money laundering and terror financing.
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