CoinDCX Co-founder and CEO Sumit Gupta has once again demanded that the 1% Tax Deduction at Source (TDS) on crypto transactions introduced through the Union budget 2022-23 should be reduced. On Friday, he tweeted, “1% TDS is detrimental to the growth of the crypto industry. It will lock up capital for traders and suck liquidity from the market. If liquidity is not there, retail investors will suffer.”
Taking up the matter about two weeks ago, Gupta had demanded that the TDS should be brought down to 0.01% or 0.05%.
“We will try to make it simple at our end but we still continue to engage and keep the dialogue open with the government asking them to bring down TDS to 0.01 or 0.05 percent. Income Tax of 30 percent is also on the higher side, which we are requesting them to bring down,” he had said.
On Tuesday, UnoCoin co-founder and CEO Sathvik Vishwanath raised the same issue. He said the high rate of TDS will discourage the crypto traders from trading, and it will hurt the volume. In a tweet, he said, “I am nowadays meeting traders who are leaving India just because they cannot tolerate TDS. Govt is not going to achieve revenue this way. Even for Govt, it should be a volume game.”
CoinDCX has recently concluded a $135 million funding round and is the highest valued Indian crypto firm ($2.15 billion) while UnoCoin is one of the oldest Indian crypto exchanges that have been in operation since 2013.
Right now, the Indian crypto sector is faced with one of the most stringent taxes and regulatory environments around the globe. A new taxation policy for the crypto sector that kicked in on April 1, 2022, levies a 30% income tax on profits. It doesn’t allow the losses to be offset by profits, making crypto transactions a double whammy.
The 1% TDS approved by the government will come into effect from July 1, 2022. Besides, crypto exchanges are already paying 18% GST, which, as per media reports, is being increased to 28%, the highest GST slab, reserved for non-essential and speculative activities in line with gambling and betting.
There was intensive debate over the taxation policy for the crypto businesses in India. Some opposition members had cautioned the government that the high rate of taxes will lead to an innovation exodus while ruling party members had asked for the taxes to be raised further, indicating the sharp divide and polarization of opinions on the issue.
As a result of high taxation and other regulatory issues, the trading volume has sharply dwindled on Indian crypto exchanges.