BENGALURU: Despite the Lok Sabha passing the Finance Bill 2022, introducing a 30% tax on virtual digital assets (VDA) from April 1, the crypto industry still sees space for reasonable changes in tax policy.
“A lower TDS can provide the government with the required tax trail without locking up the users’ capital. A higher TDS does not increase tax compliance, instead, it could drive away users from KYC-compliant platforms to the grey market,” said Ashish Singhal, Co-founder and CEO, CoinSwitch.
The crypto market is driven by high-frequency traders, like intraday traders in equity markets. These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate, he added.
A flat 30% tax that does not differentiate short-term capital gains from long-term gains, with no provision for deducting expenses incurred or offsetting losses is not in tune with the tax framework for 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 been saying that the tax will be detrimental to investor growth. Indians have already invested more than $6 billion in cryptos.
“Crypto is a global asset class and an investment product, not a form of speculation. The tax rate should have at least been the same as it is for other asset classes so as to minimize the impact on investors who do not fall into the highest tax slab,” said Sumit Gupta, Co-Founder & CEO, CoinDCX.
Blockchain and Crypto Assets Council says that the proposed section 115BBH of the Income Tax Act of 1961, which states that “loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA”, will have a negative impact on investor behaviour and tax collection.