This sums up everything.
https://economictimes.indiatimes.com/tech/technology/crypto-exchanges-to-brief-policymakers-on-tds-tangles/articleshow/89372406.cmsMumbai: The industry body representing cryptocurrency exchanges has decided to reach out to relevant policymakers to brief them about complications arising out of the government’s move to levy a 1% TDS on all crypto transactions.
The issue was discussed at the meeting of the Blockchain and Crypto Assets Council (BACC) on Saturday, where the overwhelming view was that this move would dent crypto trading volumes and drive small traders towards informal Person to Person (P2P) trading and decentralised exchanges (DEX).
Crypto exchanges derive a large chunk of their revenues from traders who frequently trade and pay a small sum on every trade.
According to the provisions of this year’s finance bill, the buyer of a cryptocurrency has to deduct 1% of the sale consideration and pay the amount as an advance tax to the government on behalf of the seller on every trade. The withholding will apply where sale consideration is more than or equal to Rs 50,000 (for specific individual payers) and Rs 10,000 for others. TDS must be deducted on both crypto-to-rupee and crypto-to-crypto swaps.
But people opposed to these provisions say the provisions are impractical and will lead to complications in compliance, thereby discouraging trading on formal exchanges.
For instance, to pay advance tax, the buyer needs to have details of the seller, such as name, PAN number, etc. As this information lies with the exchanges, not with the buyer, the buyer won't be able to remit money to the government.
No Clarity on Implementation
Moreover, day traders make multiple trades per day, often with small margins. Therefore, the volume of the TDS payouts could be substantial and also considerable time would need to be devoted to this exercise.
“Specific sections regarding TDS are still confusing. We believe multiple discussions are needed to come up with better systems or processes. We are very hopeful that the right actions will be taken,” said Sumit Gupta, CEO & cofounder, CoinDCX, one of India’s largest crypto exchanges. “We are happy that the industry has got clarity and confidence. However, I would also like to point out that it's two steps forward and one step back.”
Tax experts say that the government hasn’t thought through the tax proposals and hasn't consulted enough with the crypto stakeholders.
“The government has come up with tax regulations but has not clarified how to implement them. The way TDS regulations stand currently, it could severely dent crypto trading in India,” said Anoush Bhasin, founder of New Delhi based cryptocurrency tax advisory Quagmire Consulting.
The crypto community believes that policymakers should interact more with all the stakeholders—exchanges, market participants and tax experts—to understand the pain points of the industry.
“There were a lot of positives for the crypto industry in the budget. We believe the government has taken a step towards recognising digital assets. But the government should also look into the operations side of the exchanges to understand the impact,” said Atulya Bhat, CMO, BuyUcoin.
BACC plans to hold several knowledge sessions for policymakers to apprise them about the workings of the exchanges and how the taxes will impact their revenue models.
In their meeting, the BACC members discussed all details of the new crypto tax regime.
The crypto investor community has also been up in arms against the 30% tax on crypto currencies announced by FM Nirmala Sitharaman in the Budget.
“The thumb rule in taxation has always been to tax citizens as per their income. The rich end up paying more taxes than the poor. In this case, both are being treated in the same way. Imagine the rich, who are already in the 30% income bracket, won't have much of a problem, but consider the small investor who has invested less than Rs 50,000. Also, there were many people who were earning their income as freelancers, now they will be taxed at a flat 30%,” said Kashif Raza, founder, Bitinning, a crypto education platform.
During the last three days, the hashtags #reducecryptotax and #faircryptotax have been trending on Twitter. By Saturday evening, more than 63,000 people had signed the petition started by popular crypto influencer Aditya Singh and amplified by popular social media influencers like Sandeep Bahuguna, Pushpendra Singh and Kashif Raza.
