BENGALURU: Although the Lok Sabha passed the Finance Bill 2022, introducing a 30% tax on Virtual Digital Assets (VDAs) from April 1, the crypto industry still sees room for reasonable changes in tax policy.
“A lower TDS can provide the government with the required tax trail without tying up user capital. A higher TDS does not increase tax compliance, but could drive users away from KYC-compliant platforms into the gray market,” said Ashish Singhal, co-founder and CEO of CoinSwitch.
The crypto market is driven by high-frequency traders, like intraday traders in stock markets. These traders operate on extremely thin margins, and locking up their capital with a high TDS will limit their ability to operate, he added.
A 30% flat tax that does not differentiate between short-term and long-term capital gains, with no provision for deducting incurred expenses or compensating for losses is not in line with the framework taxation of other asset classes, and is discriminatory, the CoinSwitch co-founder said.
Ever since Finance Minister Nirmala Sitharaman announced a 30% tax and 1% TDS in the budget, crypto exchanges have said the tax will be detrimental to investor growth. Indians have already invested over $6 billion in cryptos.
“Crypto is a global asset class and an investment product, not a form of speculation. The tax rate should have been at least the same as for other asset classes to minimize the impact on investors who do not fall into the highest tax bracket,” said Sumit Gupta, co-founder and CEO of CoinDCX.
The Blockchain and Crypto Assets Council states that proposed Section 115BBH of the Income Tax Act 1961, which states that “loss arising from the transfer of VDA shall not be deductible against income arising from the transfer of a other VDA”, will have a negative impact on investor behavior and tax collection.