Member of the Indian Parliament, Ritesh Pandey called to remove 1% TDS as a crypto tax rate in India. According to him, such removal tends to affect a new asset class. The lower house of the Indian parliament on Friday adopted this provision, incorporated into the law on finances for 2022.
The bill, which involved a 1% withholding tax (TDS) deduction, also included a 30% cryptocurrency tax proposal. Accordingly, the TDS proposal will be implemented on July 1 with the application of a 30% income tax. begins April 1
Opposition to the tax proposal
However, the legislature has expressed concern over the imminent imposition of a 1% TDS as envisaged in India’s proposed cryptocurrency tax rate. According to Ritesh, such a development of any crypto transaction tends to kill the industry cryptocurrencies. He vehemently opposed the law that allows users to pay taxes on the purchase of cryptocurrencies by users and the subsequent transfer of funds to the wallet for the purchase of irreplaceable tokens. Recall that the bill recommended a TDS of 1% at each stage of the above crypto transactions.
Indian Finance Minister Nirmala Sitharaman, however, claims that TDS for crypto transactions is still aimed at achieving the purpose of monitoring. She further says that the proposed Indian tax rate on cryptocurrencies is nothing new. In the parliamentary speech last Friday, the Minister mentioned that TDS is neither an additional nor a new tax. Despite the justification of TDS by Sitharaman, many crypto community investors still agree with Pandey’s claim. Many of them, however, believe that imposing TDS on cryptocurrencies has negative consequences for investors in India.
Reactions to the 1% TDS generated by the crypto tax rate in India
Aditya Singh, co-founder of the Crypto India Youtube channel commented that the crypto tax rate in India, especially the 1% TDS, has the capacity to stop many traders from trading cryptocurrencies on a daily basis or force them to switch to international DEX exchanges. According to him, this development tends to result in liquidity problems, especially on Indian stock exchanges. Singh further says that the lower collection of trade fees caused by development is still likely to reduce revenue from taxes on goods and services.
Furthermore, Nischal Shetty, the founder of the cryptocurrency exchange, criticized the 1% TDS proposal in the Indian cryptocurrency tax rate. According to the founder, such a development tends to kill the golden goose. Shetty hoped the government would revise the 1% TDS law. According to him, the reduction or complete elimination of TDS has the capacity to grow the crypto industry.
According to a report by Chainalysis, the crypto market in India grew from June 2020 to June 2021. This development, however, puts India in one of the cryptocurrency economies with the highest growth. The rigidity of local laws in the country consequently discourages investors, which therefore tends to negatively affect the industry. Given the gradual blow that is manifesting itself in the industry, the future is uncertain for the cryptocurrency market is booming.
Moreover, the crypto tax rate in India built into the 2022 budget has caused controversy in the minds of crypto analysts. The part of the proposal, which recommends a 30% tax on VDA, states that any loss incurred during the transfer of virtual property will not be allowed to be offset against any income calculated under “other” provisions of the Income Tax Act.