A deputy finance minister told India’s parliament on Tuesday that the government had collected about $7.4 million in TDS from crypto transfers since July 1.
Given the low numbers, the government might consider the request from the local crypto industry to reduce the tax to a reasonable level – in the range of 0.01% to 0.05%.
Low TDS collection
In a written response to the upper house of the Indian Parliament, Minister of State for Finance Pankaj Chaudhary informed that the Government of India had collected 60.46 crore rupees (about $7.4 million) as TDS on the crypto transactions since July 1, 2022, according to media reports.
He also informed that the Central Board of Direct Taxes (CBDT) is conducting an awareness program for taxpayers and taxpayers. In addition, it undertakes inquiries, investigations and search and seizure operations to enforce tax law on the crypto sector, he added.
A case for tax relief
Currently, the Indian Ministry of Finance and its agencies, including CBDT, are engaged in pre-budget consultations.
The Bharat Web3 Association (BWA), whose members include Coinbase, CoinDCX, WazirX, Coinswitch Kuber, Polygon and other major players in the Indian cryptocurrency and blockchain sectors, has raised the issue of the high rate of TDS from the Ministry of Finance.
Given the low collection of TDS which indicates low transaction volume, the Indian government may reconsider the 1% crypto tax as TDS and may provide some relief.
1% of 90% TDS access volume
The 1% crypto transaction tax that came into effect on July 1, 2022 has dealt a severe blow to Indian crypto trading. It is levied on every transaction worth more than Rs. 10,000 ($250).
During an intraday trade, for example, a trader may end up making several and get a substantial amount of capital locked in TDS, which can be claimed at the end of the financial year as an income tax return (ITR).
Indian crypto exchanges saw their volume plummet by more than 50% within days of the 1% transaction tax taking effect and nearly 90% by the end of the month.
As the total collection of TDS from crypto transactions is extremely low, this lends weight to the demand from the crypto industry to bring it down to 0.01% – 0.05%.
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