The Government of India has received a total amount of Rs 60.46 crore in the form of tax deducted at source (TDS) from the trading of crypto assets, a statement from the Finance Ministry submitted in the Rajya Sabha said.
In a written reply to a query by Vivek K Tankha of Congress, Minister of State for Finance Pankaj Chaudhary mentioned the figures.
However, Tankha’s question pointed to the registration of foreign crypto exchanges in India and their legal position, their compliance with 1% TDS norms, losses to investors and remedial steps taken by the government.
Highlighting the recent FTX fallout and turbulence in the crypto market, Tankha mentioned the government’s move to roll out a 1% TDS charge on every crypto transaction from July 1, 2022.
The MoS Finance said currently crypto assets are unregulated in India, adding any person engaged in transactions related to VDAs is liable to comply with the 1% TDS norm.
Crypto assets are by definition borderless and require international collaboration to prevent regulatory arbitrage. Government does not register foreign crypto exchanges, he added.
Regarding 1% TDS mandate, the CBDT administers direct tax laws like the Income Tax Act, 1961, Prohibition of Benami Property Transactions Act, 1988, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 etc, it added.
Under the Income-tax Act, 1961, Section 194S has been inserted through the Finance Act, 2022, for deduction of tax at source in respect of transfer of Virtual Digital Assets (VDAs), which is to be complied by any person engaged in transactions related to VDAs, said the Finance Ministry.
Shivam Thakral, CEO, BuyUcoin, said the amount of tax earned by the government shows that the actual net volume of all the exchanges combined is around Rs 6,000 crore in Q3 2022, which is way below as compared to 2021 when the crypto market witnessed a massive bull run.
“The tax collection figure could rise phenomenally if certain changes to the tax structure are implemented,” he added. “Now that we are moving closer to crypto regulations, we will see the larger participation of the crypto ecosystem in contributing towards the country’s economic growth.”
Market participants believe that the number of trades in a day has plunged sharply from 200-300 million to around 10-12 million for some exchanges, whereas other top names are seeing only 1-2 million transactions a day.
Indian exchange volume is down 90%, said Kumar Gaurav, Founder & CEO of Cashaa. He suspects that a few exchanges might not be able to survive as revenue has taken a nose dip, and investors are not willing to put in new money.
The volume has moved to the decentralised and foreign exchanges and the government is losing tax money, which would have come through the exchanges, much higher than Rs 60 crore, and would have had better market undertaking, he added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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