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Cryptocurrency exchanges have requested the Finance Ministry that the 30 per cent flat rate of tax should be reviewed and be according to the tax slab of the investor.
According to sources, the crypto industry has sent a representation to the Finance Ministry on the Budget proposals and is hoping to meet officials for further consultation.
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Why the 30% digital asset tax is not enough
A higher tax is need to protect small investors and deter those using cryptos for speculative and illegal deals“The industry in general is very positive but the dampener is the 30 per cent tax rate and the 1 per cent TDS, which we are hoping to get resolved. The impact has been positive. For most people who wanted to get into crypto, the biggest fear has been uncertainty. But now because of the income tax proposals, people know they can declare and pay tax and not worry on that aspect,” said Nischal Shetty, Founder and CEO, WazirX.
Exchanges are understood to have suggested that the 30 per cent flat rate of tax should be reviewed and be according to the tax slab of the investor. The 1 per cent TDS should also be reconsidered as it would impact day traders.
“A large number of crypto traders come from the 18 to 25 year age category and many of them are still in college or starting with a job and are not in the income tax category. Under this proposal, they will have to pay a flat 30 per cent tax though their income level may be lower or they may be outside the tax threshold. Also, they have to go through the whole hassle of filing returns,” Shetty said.
On TDS
The industry has also sought clarification on issues such as whether the TDS has to be paid by the individuals or whether the exchanges can deduct and deposit it on their behalf.
Finance Minister Nirmala Sitharaman had in the Union Budget 2022-23 proposed a taxation scheme of virtual digital assets given the phenomenal increase in their transactions.
“The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime,” she had said.
Since the Budget, many players have urged the government to review the high tax on crypto assets, arguing that it is not akin to gambling and so should not be treated in the same way.
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