An Indian MP has warned that imposing a 1% tax at source (TDS) on every crypto transaction will kill the emerging asset class. This tax provision is included in Finance Bill 2022 passed by Lok Sabha, the lower house of the Indian Parliament. However, India’s finance minister insists that the TDS on crypto transactions is for tracking purposes.
MP is concerned about more than 1% TDS on crypto transactions
Lok Sabha, the Indian lower house, passed Finance Bill 2022 on Friday, which includes a proposal to tax crypto income at 30% and impose a 1% tax at source (TDS) on every crypto transaction. The 1% TDS will take effect on July 1, while the 30% income tax will be levied on April 1.
Member of Parliament Ritesh Pandey expressed concern about the 1% TDS on crypto transactions. He explained in Lok Sabha how this tax will kill the crypto industry. For example, he said that if a user buys crypto, then transfers the coins to a wallet and uses it to buy a non-fungible token (NFT), the user will be charged a TDS of 1% at each stage. He exclaimed:
When you impose a TDS of 1% in three phases, it will lead to red tapism. This also ends this asset class, which is very young.
However, Indian Finance Minister Nirmala Sitharaman claims that the 1% TDS on crypto is for tracking purposes and that it is nothing new.
She said in parliament on Friday: “TDS (tax deduction at source) is more for tracking. It is neither an additional tax nor a new tax.” The Finance Minister emphasized:
It is a tax that will help people follow it but at the same time the taxpayer can always reconcile it with the total tax to be paid to the government.
Nevertheless, many people in the crypto community in India agree with MP Pandey about the negative impact that imposing a 1% TDS on crypto will have.
Aditya Singh, co-founder of the YouTube channel Crypto India, commented: “No loss offset plus 1% TDS will force many traders to stop day trading or switch to international exchanges & dex.” He added that “this will result in liquidity crises in Indian exchanges plus lower collection of trading fees and thus lower GST revenues” for the Government of India.
The founder of cryptocurrency exchange Wazirx, Nischal Shetty, noted that “1% TDS is an example of killing the golden goose.” He thought:
I hope the government will reconsider and reduce or eliminate this TDS to help further grow the crypto industry
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1% TDS, 1% TDS India, 30% crypto tax, financial account 2022, India tax crypto, India tax cryptocurrency, Indian finance minister, Indian parliament, Indian MP, Indian tax, lok sabha, tracking TDS
What do you think of how India plans to tax crypto income and transactions? Let us know in the comments below.
Kevin, an Austrian economics student, found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.
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