Crypto Industry Asks Centre to Rethink on Proposed TDS

The cryptocurrency industry has appealed to the government to reexamine the budget proposed to impose a tax deducted at source, or TDS, on virtual digital asset transactions, saying it will be difficult to comply with.

The industry also urged the government to reconsider the decision to levy a tax of 30% on current market value when crypto assets are gifted or given to employees as part of their remuneration, saying the tax is levied without waiting for the receiver to sell it and book any profit.

These issues figured when representative of leading domestic crypto exchanges met with finance ministry of ficials on Friday to discuss budget proposals, people familiar with the deliberation told ET.

They submitted their representation on some of the key concerns.

Finance minister Nirmala Sitharaman has proposed a 30% tax on gains made from any private virtual digital assets from April 1. The budget has also proposed a 1% TDS on payment towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient.

Many experts said crypto taxation required more discussion before implementation as the current proposals lack clarity on various issues.

“They are not banning crypto but killing it with tax compliance,” a crypto industry official told ET on condition of anonymity. “TDS is technically not feasible as tracking down identify becomes difficult.”

Responsibility of paying 1% TDS lies with the purchaser at the time of payment. This would be difficult to comply with in situations where assets are being bought from a non-resident seller and domestic exchange only facilitates supply from an oversea exchange, the person said.

Homi Ministry, partner at Deloitte India, said,” In a case where the consideration is in kind, the provision says the payer is responsible to make sure that the TDS is duly deposited.” However, how this will be enforced is yet to be seen, he said.

There is also a lack of charity on how it will apply in various other situations, like, for example, when there is an exchange of one kind of crypto asset with another (barter) without any cash, industry insiders said.

They have also sought clarity on transactions with residents of a country with which India has a double taxation avoidance agreement.

The industry also wants clarity on issues including in whose favour will TDS be deducted and who would be the counterparty as foreign exchanges will not reveal the identity of sellers, making compliance difficult.

Some experts termed the budget proposals a Knee-jerk reaction.

“The introduction of crypto tax under the income-tax regime is nothing less than a knee-jerk reaction to tax a fast-building parallel ecosystem currency,” said Saurrav Sood, practice leader, international tax, at professional services firm SW India. S-ET

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