A considerably small detail can cause an avalanche effect. After the media started reporting that India cut 1% TDS (tax deducted at source) on Virtual Digital Assets to 0.1%, the Government stood up to reassure that the tax continues to be the same. Apparently, Income Tax Department made a typo error on their website. To clear the confusion, the department rectified the mistake on Wednesday.
“Some media reports have come to the notice of CBDT (Central Board of Direct Taxes), claiming that the rate of TDS on Virtual Digital Assets (VDA) has been reduced to 0.1%. It is hereby clarified that there is no change in the rate of TDS on VDA, which continues to be 1%,” stated the government office on Twitter (NYSE:TWTR).
Some media reports have come to the notice of CBDT claiming that the rate of TDS on Virtual Digital Assets(VDA) has been reduced to 0.1%.It is hereby clarified that there is no change in the rate of TDS on VDA, which continues to be 1%.@FinMinIndia
— Income Tax India (@IncomeTaxIndia) June 8, 2022
Harsh crypto taxation policy in India
The taxes and complicated Indian Government’s approach to cryptocurrencies have strongly affected the second biggest world crypto market. Since April 1, when the new taxation policy kicked in, the trading volumes at India’s major cryptocurrency exchanges slumped to their lowest in years.
According to the Crebaco report, U.S. dollar trading volume dropped by 72% on WazirX, 59% on ZebPay, 52% on CoinDCX, and 41% on BitBns in April. Cryptocurrency traders are now entitled to a 30% flat tax on all crypto-related income. From July 1, a 1% tax deducted at source will be a levy on every cryptocurrency transaction above Rs. 10,000 (about US$129) will become applicable.
A 1% TDS on most transactions is expected to drain out liquidity from the market, causing a further drop in trade volumes. Smaller exchanges, which depend heavily on volumes of transactions, are likely to be hurt the most after July 1, causing some of them to even close.
It created uproar in the crypto community and according to experts, can cause a crypto exodus. Nischal Shetty, the founder of WazirX said on Twitter:
“Countries that do not acknowledge tech innovation will experience massive brain drain. We’re living in a world where location is irrelevant. Talent will go where it is welcomed!”
Countries that see an opportunity in innovation will grow fastCountries that do not acknowledge tech innovation will experience massive brain drain
We’re living in a world where location is irrelevant
Talent will go where it is welcomed!#Decentralize #BuildForCrypto
— Nischal (Shardeum) (@NischalShetty) April 9, 2022
The Reserve Bank of India has been persistently against cryptocurrencies like Bitcoin, saying “there is no underlying value for such instruments which are essentially speculative in nature.” RBI is working to introduce a digital version of the fiat rupee for better currency management, reducing settlement risk in the system.
As India and crypto community anticipates consultation paper on cryptocurrencies prepared by the Government, Reserve Bank Deputy Governor T Rabi Sankar said to Economic Times, that the soon-to-be-introduced central bank digital currencies (CBDCs) can “kill” whatever little case that exists for private virtual currencies like Bitcoin.
