Cryptocoin

A recent report suggested that India should weigh on reducing the 1% TDS on cryptocurrency trade. The ‘Impact Assessment of 1 percent TDS on VDAs’ report has inferred that high tax rate is leading capital and users to choose ‘platforms in foreign jurisdictions and the grey market’.

As per reports, the study was jointly presented by Chase India and Indus Law and further recommended that the crypto platforms/exchanges must also perform users due diligence processes that can help identify any future risk.

The report read:

“The existing 1 percent TDS on crypto trade, combined with the absence of comprehensive regulations, is causing a flight of capital and users to platforms in foreign jurisdictions and the grey market.”

The motive of TDS is to have a record of all crypto transactions, but the same can be attained even with a lower TDS rate. A nominal TDS rate can also help in tracking transactions. A decent TDS rate will also help in tax collections if Indian traders continue to trade from Indian KYC backed platforms.

It also suggested the government must ask all crypto firms to hold e-KYC authentication on all investors/traders as per the Aadhaar rules for security purposes.

The report also says that Crypto platforms must mandatorily submit transaction records to the tax regulatory authority. This will let tax authorities know which ‘valid’ exchanges are following the TDS norm.

The report comes at a crucial time as the 2023-24 Union Budget is scheduled on February 1.