The major stakeholders of India’s cryptocurrency industry are likely to present a memorandum to the union finance ministry urging the government to review the recently proposed taxation rules around virtual digital assets transactions, top sources within the cryptocurrency sector confirmed to Business Today. Sources said that the discussions are underway to formulate a white paper on the various ways the recently proposed tax rules will impact the domestic cryptocurrency industry as well country’s economy and a submission will be made before the finance ministry soon.
The sources added that the industry leaders, spearheaded by the Blockchain and Crypto assets Council (BACC), a part of the Internet and Mobile Association of India (IAMAI), will draft the memorandum.
Several queries sent to BACC, however, did not elicit any response. Notably, the finance secretary, T.V Somanathan recently told Business Today in an exclusive interaction that the new tax rule will be effective April 1, 2022.
“The Income Tax Act does not exempt any income other than Agri income. Income from cryptocurrencies has been taxable even before this law, it is taxable today and it will be taxable after April 1. What is changing is the regime of taxation. It is taxable even before April 1 but not at 30 per cent,” Somanathan said.
Given that the new tax rule will come into effect from April 1, 2022, the industry is readying to make a representation before the finance ministry soon, as per multiple sources aware of the development.
“There are two major concerns within the cryptocurrency industry urgently. The first one revolves around the fact that taxation on crypto transactions should not be at a fixed 30 per cent rate, but at par with other asset classes, especially assets depending on the income levels of the investors, said Kashif Raza, founder, Bitinning, a crypto education platform.
Raza argues that within the crypto industry there is a consensus building up that imposition of tax slabs means cryptos are seen to be at par with gambling, betting, etc. "This will impact the small investors community. Another concern revolves around 1 per cent TDS which will impact the trading volumes on domestic exchanges. This implies a huge compliance burden for the crypto exchanges which will have to produce records at every transaction ,” he adds.
Since last week, there has been quite a buzz in the cryptocurrency community around the recently proposed tax rules . However various crypto exchange CEOs, including ConDCX’s CEO Sumit Gupta, who is also the co-chairman of BACC, and WazirX's CEO, Nischal Shetty, have been vocal about their support to the investors' community regarding 30 per cent tax rule.
“While taxation is a positive step, 30 per cent tax will discourage traders. 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.” Gupta said in a tweet earlier.
Shetty has also voiced his support for an online campaign initiated by Aditya Singh, co-founder, Crypto India on change.org, petitioning union finance minister to review the proposed tax rules.
Singh told Business Today that the online signature campaign revolves around the issue that proposals put forth in Budget 2022 by the government places crypto at the same footing against social evils like betting and gambling. This can have a devastating impact not only on the Industry per se but the economy as a whole, he added.
Singh said that the assessment of the crypto community is that India, which is one of the fastest growing markets in the cryptocurrency industry globally, could experience wealth drain / investments loss due to the imposition of higher tax rates, which could ultimately impact economy.
“An important point to remember here is that not every cryptocurrency investor is rich. Some of them are very small traders , for whom 30 per cent tax rates and 1 per cent TDS will not augur well and they may quit such investments or move to global exchange ,” he added.
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