BENGALURU: The introduction of 1 per cent Tax deducted at source (TDS) has adversely affected the Indian crypto industry, say experts. Start-up body IndiaTech.org has recommended that the rate of TDS be deducted from 1 per cent to 0.01 per cent through an amendment to Section 194S in the upcoming Budget.
Since July 1 transfer of virtual digital assets (VDAs) such as cryptos has been attracting 1 per cent TDS under section 194S of the Income-tax Act. Rameesh Kailasam, CEO of IndiaTech.org, said the 1 per cent TDS is negatively impacting Indian start-ups and benefitting overseas transactions.
In its recommendation, IndiaTech.org said, “Currently TDS under Section 194S there is a high rate of TDS with ambiguity on the inclusion of foreign exchanges under the scope of the TDS mandate and a Low threshold limit. This has led to a level playing field issue and flight of business out of India.”
The share of foreign overseas exchanges (domiciled outside India) app downloads as a percentage of overall VDA trading app downloads in India between July to September 2022 was 40%, a 350% increase if compared with a similar time period from the start of the year, it said.
Based on P2P data, it is estimated that Indian users contributed about Rs 80,000 crore to volumes on foreign VDA exchanges over a period of four months since July, it added. Kailasam said as the primary intention is to track, we are recommending the rate of TDS be deducted from 1 per cent to 0.01 per cent.
“This will ensure tracking and tracing. The low rate will encourage Indian investors to continue engagement on Indian platforms, instead of migrating to foreign exchanges and untraceable P2P transactions,” he added.
Mohammed Roshan, co-founder & CEO of GoSats, said the data clearly shows this (1 per cnet TDS) has led to a drastic drop in exchange volumes and revenue, directly correlating to the negative sentiments among crypto investors.
“In the backdrop of negative macroeconomic conditions and the present crypto market downturn, reducing taxes and winning back customers is a matter of survival for exchanges and others in the industry.”
Share of overseas exchanges’ app downloads rise
Share of foreign overseas exchanges (domiciled outside India) app downloads as a percentage of overall VDA trading app downloads in India between July-September was 40%, a 350% rise if compared with a similar time period from the start of the year, IndiaTech.org said