A junior finance minister told the Indian parliament on Tuesday that the government has collected about $7.4 million in TDS on crypto transfers since July 1.
Given the low numbers, the government may consider the local crypto industry’s demand to reduce the tax to a reasonable level – in the range of 0.01% to 0.05%.
Low TDS Collection
In a written reply in the upper house of the Indian Parliament, Minister of State for Finance Pankaj Chaudhary informed that the Indian government collected Rs 60.46 crore (Approx. $7.4 million) as TDS on crypto transactions since July 1, 2022, media reports said.
He also informed that the Central Board of Direct Taxes (CBDT) conducts an awareness program for taxpayers and deductors. Additionally, it undertakes surveys, inquiries, and search and seizure operations to enforce the tax law on the crypto sector, he added.
A Case for Tax Relief
Right now, the Indian Finance Ministry and its agencies, including CBDT, are engaged in pre-budget consultations.
Bharat Web3 Association (BWA) which counts Coinbase, CoinDCX, WazirX, Coinswitch Kuber, Polygon, and other major players in Indian cryptocurrency and blockchain sectors as members, has raised the issue of the high rate of TDS with the Finance Ministry.
Given the low TDS collection that indicates low trading volume, the Indian government might reconsider the 1% crypto tax as TDS and might provide some relief.
1% TDS Hit Volume by 90%
The 1% crypto transaction tax that became effective on July 1, 2022, dealt a blow to Indian crypto trade. It is levied on each trade valued above Rs. 10,000 ($250).
On an intraday trade, for example, a trader may end up doing multiple of these and get a substantial amount of capital locked in TDS, which can be claimed at the end of the financial year as the Income Tax Return (ITR).
Indian crypto exchanges saw over 50% drop in volume within a few days of the 1% transaction tax coming into effect and nearly 90% by the end of the month.
As the total TDS collection from crypto transactions is extremely low, it lends weight to the crypto industry’s demand to bring it down to 0.01% – 0.05%.