Top crypto players are taking up the demand with the ministry through the Blockchain and Crypto Assets Council (BACC), which is part of the Internet and Mobile Association of India, and startup industry body IndiaTech.
According to two people ET spoke to, these crypto platforms that are members of the BACC have recommended that the proposed TDS be reduced to about 0.01%.
“Crypto platforms have recommended a range, and urged the finance ministry to consider it,” said one of the people who is directly familiar with the discussions. “Even if things are not resolved before the next financial year begins, the industry is hopeful that the TDS requirement may reduce in the next 2-3 quarters.”
Meanwhile, startup industry body IndiaTech has written to finance minister Nirmala Sitharaman and revenue secretary Tarun Bajaj, requesting to eliminate the TDS entirely or to bring it down to 0.01%.
“If the intent of the proposals was to seek additional revenues from such crypto assets, then the 1% tax on the entire transaction value will render the business unviable, thereby having an impact on government revenues forcing investors and those engaging in trade to operate overseas or be forced to resort to operating through opaque P2P methods,” IndiaTech, an industry association representing consumer Internet startups, wrote in the letter, a copy of which ET has seen.
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“While we raised many issues that require clarifications from the finance ministry, however what needs to be immediately relooked at is the manner of treatment … The 1% tax at source also makes it unviable and if track and trace was the intent, a 0.01% can serve that intent,” said said Rameesh Kailasam, chief executive of IndiaTech.
The industry body has raised a dozen concerns including questions that highlight potential implementation and compliance hurdles with the proposed regime, which it says make compliance “a bit” onerous and economically unviable for the industry. It has also asked for further deliberations on whether stable-coins should be within the definition of ‘foreign currency’ and thereby not considered as a crypto asset.
In the letter, IndiaTech made six recommendations, including taxing virtual digital assets (VDAs) similar to assets in the investment class and withdrawing the TDS requirement entirely due to its economic and administrative challenges. It also sought a clearer definition of VDAs.
It has also reiterated some of its earlier recommendations, including a uniform PAN-based KYC to track transactions and instituting a mechanism under the Suspicious Transaction Reporting Mechanism of the Financial Intelligence Unit.
Crypto influencers and top executives on social media platforms are also pushing for a reduction in crypto tax.
On Monday, Sumit Gupta, CEO of crypto exchange CoinDCX tweeted: “By heavily taxing crypto, we’re not just demotivating people from investing in this asset class but also demotivating innovators and investors from building and investing in these businesses.”
A better taxation plan for cryptos will open up many opportunities, he said.
By heavily taxing crypto we’re not just demotivating people from investing in this asset class but also demotivatin… https://t.co/HTIiw4tMd6
— Sumit Gupta (CoinDCX) (@smtgpt) 1647239367000
Finance Minister Nirmala Sitharaman proposed a 30% tax on returns from digital currencies and a 1% TDS on all transactions involving digital assets in the 2022 budget. Following the announcement, which was largely hailed by stakeholders as a step forward, the crypto industry has made multiple representations to the government, asking for the tax slab and TDS to be reduced.
The 1% TDS has particularly emerged as a sore point, according to industry stakeholders, as it makes trading in crypto prohibitively expensive.
