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Cryptocurrency exchanges are hoping for a discussion with the Finance Ministry on the tax proposals announced in the Union Budget 2022-23. The industry is likely to request for a review of the one per cent tax deducted at source and a reduction in the 30 per cent tax.
“The proposed TDS will be a challenge for intraday traders. We would request a discount on top of the one per cent TDS,” said Sathvik Vishwanath, co-founder of cryptocurrency exchange Unocoin.
Margins
Margins for day traders can be as low as 0.5 per cent, noted another industry player, adding that a 0.1 per cent TDS rate could be more beneficial. The proposed TDS would also impact liquidity in the market and also increase compliance burden for small investors.
“The announcement on the tax treatment of crypto is in the right direction and clears ambiguity but a larger discussion will be helpful. We believe that crypto assets should be treated fairly and at par with other asset classes like equities to enable growth of the industry in the long term. A 30 per cent tax will discourage traders. It is not something like gambling, it is an investment in technology. The rate of TDS can be in line with the securities transaction tax for equities,” said Sumit Gupta, Founder and CEO, CoinDCX and Co-Chair, Blockchain and Crypto Assets Council.
He added that the industry will also seek clarity on the TDS clause as its wording is leading to some confusion.
The proposal that crypto losses can’t be set off is not good for people who want to do business in the industry as there are cycles in the market.
Finance Minister Nirmala Sitharaman had in the Union Budget 2022-23 proposed a tax scheme for bring virtual digital assets under which would attract tax at the rate of 30 per cent any income from transfer of such assets. Further, to capture the transaction details, the Budget has also proposed to levy TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold.
Ashish Singhal, CEO, Coinswitch said the company sees the 30 per cent tax proposal as a positive development and signals that the government recognises this industry.
“Now there are more nuances to this. Which is: could we look at taxing this at par with other assets like securities. These need to be worked out and I’m hoping that the government will work with the industry on some of these finer aspects,” he said.
Siddharth Menon, COO, WazirX said, “There are a lot of nuances and our team is trying to figure out the long term impact. But it is a good move as it clears ambiguity and the industry can start building for the opportunity on Web3.”
Investor sentiment not impacted
Players noted that investor sentiment remains largely unimpacted by the proposals on taxation though there have been some queries regarding cryptos traded previously.
“Investor sentiment has actually improved. There has been a 50 per cent increase in sign up in the last 24 hours for us,” Menon said.
“The user behavior on our platform is similar to what we would see on other business days,” Singhal also said.
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