India’s Debated 1 Percent TDS on Crypto Transfers Added Millions to Government Treasury: Details

Between June and November last year, the TDS collection from crypto transactions amounted to $7.4 million (roughly Rs. 60 crore).

Written by Radhika Parashar, Edited by Siddharth Suvarna | Updated: 3 April 2023 12:49 IST

India’s Debated 1 Percent TDS on Crypto Transfers Added Millions to Government Treasury: Details

Photo Credit: Unsplash/ Shubham Dhiman

India's crypto community is expected to swell to over 156 million members by 2023 end

Highlights

India aims to keep track of crypto transactions
India brought crypto under tax regime last year
Elaborate crypto laws in India still awaited

The outcry from crypto traders and investors went unheard after Indian finance minister Nirmala Sitharaman failed to revise the controversial 1 percent TDS collection on each crypto transaction. In the last nine months, this TDS collection has said to have fetched over $19 million (roughly Rs. 157 crore) to the government treasury. The detail was disclosed to the Parliament recently by Pankaj Chaudhary, who is the Minister of State for Finance in the country. The data tracks ten months since the TDS law went live last July in India.

“Direct tax collected by way of tax deducted at source under section 1945 of the Income-tax Act, 1961, on payments made upon transfer of Virtual Digital Assets, aggregates to Rs. 157.9 crore upto 20/03/2023 for FY 2022-23,” Chaudhary said in a written update to the Upper House.

Breaking:rotating_light:: The Government of India:flag-in: has collected ₹157 crore as TDS on Crypto as to 20th March 2023. #Crypto #tax #india #Bitcoin pic.twitter.com/icnLy92eVc
— Pioneers π (@CryptoPi0neers) March 29, 2023

Indians, last June, began to see one percent tax deductions on each crypto transaction. This essentially means that one percent TDS is being levied on every step around the purchase, trade, and deposit of crypto assets.

Not just on cryptocurrencies, this one percent TDS is also be charged on the transactions of other VDAs as well, such as non-fungible tokens (NFTs) and other metaverse elements.

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Between June and November last year, the TDS collection from crypto transactions reportedly amounted to $7.4 million (roughly Rs. 60 crore), Chaudhary had informed at the time.

In the last five months, this amount has spiked by $11.6 million (roughly Rs. 95 crore) — indicating a rise in crypto transactions in India.

Time and again, members of India's crypto community have urged the finance ministry to revisit the 1 percent TDS and consider reducing it to promote the growth of the overall crypto sector.

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In a tweet, Sathvik Vishwakarma, the CEO of Unocoin crypto exchange reacted to Chaudhary's disclosure, calling the TDS rule a distraction in the growth of the digital assets industry in India.

Not depending on one entity or one person or one country is what makes #crypto & #blockchain powerful. India should use its full potential to manifest its benefits. High taxes and unrealistic TDS is a distraction. #reducecryptotax #faircryptotax Day-421 #IndiaWantsCrypto @Unocoin
— Sathvik Vishwanath (Unocoin) (@sathvikv) March 29, 2023

The government of India believes that by imposing one percent tax deducted at source (TDS) on each crypto transaction, it would be easier to keep a track of them despite the element of anonymity that crypto transactions entail.

The crypto community in India is set to surpass the US, UK, Russia, and Japan in terms of adoption this year. As per a recent report by Statista, India's crypto community is expected to envelop over 156 million users by the end of 2023.

Amid the expansion of the sector, the government of India, via its tax laws around crypto, is looking to curb any potential abuse of digital assets for illegal activities like money laundering and terror financing.

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Further reading: Cryptocurrency, Crypto Law, Crypto India, TDS

Radhika Parashar

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Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More