As India's tax policies near the enforcement date of April 1, a member of parliament from the Bahujan Samaj Party (BSP), Ritesh Pandey, has expressed concerns in the Lok Sabha. Pandey has said that the 1 percent Tax Deducted at Source (TDS) will promote “red tapism” while killing off this up-and-coming digital asset class. The ‘red tapism' idiom refers to those formal rules that are claimed to be excessive and rigid. Pandey's comments come against the backdrop of an outcry from India's crypto community, which is requesting the government to reconsider the tax regime it's pushing the crypto industry into.
“When you impose a 1 per cent TDS at three stages, it will give birth to red tapism. Doing so will also finish this asset class, which is very young,” the BSP leader said.
This 1 percent TDS on crypto transactions, Pandey elaborated, will require a person to pay the TDS at three stages — when a cryptocurrency is purchased, when it is transferred to a crypto wallet, and when the cryptocurrency is used to purchase another digital asset, like a non-fungible token (NFTs).
In recent times, famous Indian celebrities like Amitabh Bachchan and Salman Khan have launched NFTs related to their identities. Bollywood movies such as ‘83 have also released NFTs.
The BSP leader said that collectors wishing to hold digital assets from such popular NFT series will have to spend extensively due to the levied taxes.
A video clipping of Pandey's addressal of the tax law has been widely shared on social media.
India's Finance Minister Nirmala Sitharaman has, however, maintained that this TDS is solely for transaction tracking purposes.
“TDS (tax deducted at source) is more for tracking. It is not additional tax and not a new tax. It is a tax that will help people track it, but at the same time the taxpayer can always reconcile it with the total tax to be paid to the government,” Sitharaman had earlier said.
The crypto industry in India is bracing itself for the regulatory laws that take effect starting April 1.
Industry insiders, however, are concerned that the 30 percent tax on crypto-generated income itself is not directly beneficial to the Indian community.
“Adding Cryptocurrency under the ambit of GST on top of crypto tax and TDS is bound to put more pressure on the crypto community. With the scope of pushing a decentralised financial system for the better, this might defy the actual purpose of the same. The GST council must take a serious note on this,” Om Malviya, President, Tezos India told Gadgets 360.
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