Crypto Industry Calls for Tax Cut and 1% TDS Waiver
Cryptocurrency exchanges are hoping for a discussion with the Ministry of Finance on the tax proposals announced in the Union Budget 2022-23. Industry will probably ask for a 1% withholding tax review and a 30% tax reduction.
“The proposed TDS will be a challenge for intraday traders. We would ask for a rebate on top of the 1% TDS,” said Sathvik Vishwanath, co-founder of cryptocurrency exchange Unocoin.
Margins for day traders can be as low as 0.5%, another industry player noted, adding that a TDS rate of 0.1% could be more beneficial. The proposed TDS would also impact market liquidity and also increase the compliance burden for retail investors.
“The announcement on the tax treatment of crypto goes in the right direction and removes the ambiguity, but a broader discussion will be helpful. We believe that crypto-assets should be treated fairly and equally with other asset classes like stocks to enable long-term industry growth. A 30% tax will discourage traders. It’s not something like gambling, it’s an investment in technology. The TDS rate can be consistent with the securities transaction tax for stocks,” said Sumit Gupta, founder and CEO of CoinDCX and co-chair of the Blockchain and Crypto Assets Council.
He added that the industry will also seek clarification on the TDS clause, as its wording is confusing.
The proposition that crypto losses cannot be compensated is not good for people who want to do business in the industry because there are cycles in the market.
Finance Minister Nirmala Sitharaman had proposed in the Union Budget 2022-23 a tax regime for bringing in virtual digital assets under which a rate of 30% would be imposed on any income derived from the transfer of such assets. In addition, to capture transaction details, the budget also proposed to levy TDS on payments made in connection with the transfer of virtual digital assets at the rate of 1% of such consideration above a monetary threshold. .
Ashish Singhal, CEO of Coinswitch, said the company sees the 30% tax proposal as a positive development and signals that the government recognizes this industry.
“Now there are more nuances to this. That is: could we consider taxing this in the same way as other assets such as securities. These need to be worked out and hopefully the government will work with industry on some of these finer aspects,” he said.
Siddharth Menon, COO, WazirX said, “There are a lot of nuances and our team is trying to understand the long-term impact. But it’s a good move because it removes the ambiguity and the industry can start building for the opportunity on Web3.
Investor sentiment is not impacted
Players noted that investor sentiment remains largely unaffected by the tax proposals, although there have been some questions regarding previously traded cryptos.
“Investor sentiment has actually improved. There’s been a 50% increase in listings in the last 24 hours for us,” Menon said.
“User behavior on our platform is similar to what we would see on other working days,” Singhal also said.
February 02, 2022