Will India’s crypto tax dent the innovation and growth of the emerging sector?

Crypto profits over the years have encouraged Indians to start investing in digital assets. However, in the latest Union Budget, the Indian government has made crypto profits subject to tax deduction. A 30 per cent tax has been taken into account to levy duty on all income from digital assets in the country. Apart from crypto tax, the government also plans to cut 1 percent tax at source (TDS) with effect from July 1. The plan to levy TDS is facing criticism especially from Indian crypto exchanges and investors.

To discuss the impact of crypto tax with planned TDS, of class host Akhil Arora speaks with Rajagopal Menoncrypto exchange vice president wazirxAnd Gaurav MehtaFounder of crypto tax consultancy Catax.

Similar to the existing capital gains tax, a 30% crypto tax is to be levied on all gains from crypto assets. it has been done in effective from 1st April,

However, unlike the regular crypto tax, there is a plan to levy one percent TDS on all crypto transactions – not just those that generate profit. As I said earlier, this is in effect from July.

The government believes that its TDS mechanism for crypto transactions will help track transactions and prevent tax evasion in the country. This makes crypto exchanges liable to collect taxes on their platform on behalf of sellers.

Crypto exchanges are demanding the government to provide clarity on the implementation of TDS and reduce its rate.

“What this one percent TDS does is that it completely wipes out the trading market, because what happens is that after around 250-300 trades, it starts eating into your capital,” says Menon.

The challenges that crypto exchanges and investors see due to TDS – and other recent crypto regulations – have begun resulting in an adverse effect On crypto trading in the country. Some Indian stakeholders have also started looking to overseas markets to sustain their earnings from crypto assets.

The WazirX executive underlined, “Unfortunately what the government is doing is that because of all these regulations, you will never have an ecosystem around crypto in India.”

He also suggested that the ongoing regulations could affect innovation in the emerging crypto sector and areas including non-fungible tokens (NFTs).

However, Mehta argues that since individuals were not paying tax for their transactions for the past few years, the government had to bring in TDS.

Mehta claims, “India is not a tax paying country at all.” “It is a personal habit of avoiding taxes which would have a fiduciary duty or at least to drive revenue for the government through taxes through exchanges. will be responsible.”

You can listen to the entire discussion, which lasted about half an hour, by hitting the play button on the Spotify player embedded above.

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Cryptocurrency is an unregulated digital currency, is not legal tender and is subject to market risks. The information in this article is not intended to be financial advice, trading advice or any other advice or a recommendation of any kind offered or endorsed by NDTV. NDTV shall not be liable for any loss arising out of any investment based on any alleged recommendation, forecast or any other information contained in the article.

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