By Linus Garg
First publised on 2022-07-05 06:45:52
With the new tax regime for crypto exchanges kicking in from July 1, all such exchanges in India have seen a steep decline in volumes as investors have preferred to stay away. Trading was already depressed due to a host of factors such as falling prices and repeated cautionary statements by the RBI advising the public not to invest in something that did not have underlying value. The 30 percent tax on profits and 1% TDS to be deducted on payout beyond Rs 10000 in a year was the last straw. Trading has come down by as much as 87% in one of the exchanges and more than 60% on other exchanges.
A 1% TDS on payout is not a significant amount for the investors while on the other hand it is necessary to ensure that the trade does not escape the tax net. So does the disappearance of investors prove that many tax dodgers were using the platforms as they were out of the tax ambit? Although one has to provide PAN details, Aadhar number and bank account details when registering on such crypto platforms in India and everything is above board, the very fact that TDS was not deducted meant that profits could have gone unreported. But with TDS coming into effect from July 1, the tax department will now know the payout made to a particular PAN number and the income - or loss - will have to be reported in tax returns.
Despite the reservations of the crypto exchanges, TDS is a must for these transactions. The government can reconsider the highest rate of capital gains it has imposed on profits from crypto dealings and can perhaps lower it to 20% but in order to ensure that all such transactions are reported in tax returns, TDS must stay. Those investors who are making genuine transactions on such exchanges have nothing to fear - it is only those who wished to dodge taxes that will no longer come on board.