Crypto gains – in recent years – have encouraged Indians to start investing in digital assets. However, in the latest Union Budget, the Indian government has subjected crypto gains to tax deductions. A 30 percent tax has been considered to account for all digital asset income in the country. In addition to the crypto tax, the government has also planned a 1 percent tax deduction at source (TDS) that will take effect from July 1. In particular, the plan to impose TDS has been criticized by Indian crypto exchanges and investors.

To discuss the impact of crypto-taxation beyond the planned TDS, Orbital host Akhil Arora speaks with Rajagopal Menon, vice president of crypto exchange WazirX, and Gaurav Mehta, founder of crypto-tax advisory firm Catax.

Similar to the existing capital gains tax, the 30 percent crypto tax is planned to be levied on all gains from crypto assets. It has been in effect since April 1.

However, unlike the regular crypto tax, the one percent TDS is intended to be levied on all crypto transactions – not just those that generate profit. This will be introduced in July, as I mentioned earlier.

The government believes that the TDS crypto transaction mechanism will help track transactions and prevent tax evasion in the country. It also makes crypto exchanges liable for depositing the tax on behalf of merchants on their platforms.

Crypto exchanges are demanding government clarity on implementing TDS and lowering its rate.

“What this one percent TDS does is it completely wipes out the trading market because what happens is it starts eating your capital after about 250-300 trades,” Menon says.

The challenges crypto exchanges and investors are seeing as a result of the TDS – and other recent crypto regulations – are negatively impacting crypto trading in the country. Some Indian stakeholders have also begun looking to overseas markets to maintain their crypto asset income.

“Unfortunately, what the government is doing is that because of all this regulation, you will never have an ecosystem around crypto in India,” the WazirX CEO underlines.

He also suggests that ongoing regulations could impact innovation in the emerging crypto sector and areas, including non-fungible tokens (NFTs).

However, Mehta argues that since individuals did not pay taxes on their transactions in recent years, the government had to introduce the TDS.

“India is not a tax-paying country at all,” Mehta claims. “It is an individual custom of tax evasion where there would be a fiduciary duty or at the very least the responsibility of the exchanges to generate the revenue for the government through taxes.”

You can listen to the full discussion, which lasts about half an hour, by pressing the play button on the Spotify player embedded above.

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Cryptocurrency is an unregulated digital currency, not legal tender, and subject to market risks. The information in the article is not intended as financial advice, trading advice, or any other advice or recommendation offered or endorsed by NDTV. NDTV is not responsible for any loss arising from any investment based on any perceived guidance, forecast, or other information contained in the article.


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