As India’s tax policy approaches its enforcement date of April 1, a Bahujan Samaj Party (BSP) MP Ritesh Pandey has expressed concern in the Lok Sabha. Pandey has said the 1 percent tax deduction at source (TDS) will promote “red tapism” while destroying this emerging digital asset class. The idiom “red tapism” refers to those formal rules that are claimed to be exaggerated and rigid. Pandey’s comments come against the backdrop of an outcry from India’s crypto community, which is calling on the government to rethink the tax regime that the crypto industry is being forced into.
“If you impose a TDS of 1 percent in three phases, red tapism is created. This will also end this asset class, which is very young,” said the BSP leader.
This 1 percent TDS on crypto transactions, Pandey explained, requires a person to pay the TDS in three stages: when a cryptocurrency is purchased, when it is transferred to a crypto wallet, and when the cryptocurrency is used to buy another digital asset, such as a non-fungible token (NFTs).
In recent times, famous Indian celebrities like Amitabh Bachchan and Salman Khan have launched NFTs related to their identities. Bollywood movies like ’83 have also released NFTs.
The BSP leader said that collectors who want to keep digital assets of such popular NFT series will have to spend a lot of money because of the taxes levied.
A video clip of Pandey’s speech on the tax law has been widely shared on social media.
However, Indian Finance Minister Nirmala Sitharaman has maintained that this TDS is for transaction tracking purposes only.
“TDS (tax deduction at source) is more for tracking. It is neither an additional tax nor a new tax. It’s 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,” Sitharaman had said earlier.
India’s crypto industry is bracing for the regulatory laws that will come into effect from April 1.
However, industry insiders are concerned that the 30 percent tax on crypto-generated revenue itself is not directly beneficial to the Indian community.
“Adding crypto within the scope of GST on top of crypto tax and TDS will undoubtedly put more pressure on the crypto community. With the scope of improving a decentralized financial system, this could defy its very purpose. The GST council should take this seriously,” Om Malviya, president of Tezos India, told Gadgets 360.
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