New Delhi: The levy of one percent tax deducted on source (TDS) on the transaction of crypto currencies such as Bitcoin, Ethereum, Tether, Shibu Inu And Dogecoin, and other such virtual currencies and non-fungible tokens, will bring transparency as it will encourage genuine buyers in the market, said two experts.
As per the government regulation, 1% TDS on trading of crypto currencies and other virtual currencies have come into effect from July 1. As a result the trading of crypto-currencies on crypto exchanges such as WazirX, ZebPay and CoinDX has come down drastically. According to the data, the trading has come down by 30-70% in the last four days.
This is the second instance when the trading of crypto currencies on crypto exchanges operating in the country has come down drastically after the regulatory changes. Finance Minister Nirmala Sitharaman had announced a levy of 30% tax on the profit booked on the trading of crypto currencies in this year’s budget announced in February this year. And as a result, the trading of crypto currencies had declined by 30-70% when the new tax came into effect from early April.
This is the second time in the current year when trading of crypto currencies has declined drastically as a result of regulatory changes. Some experts, however, dismiss the apprehensions as these moves will encourage genuine buyers in the market.
Also read: Bitcoin drops below $20,000 as crypto selloff quickens
Agam Chaudhary, CEO of Two99, an NCR based e-commerce and internet company, says imposition of one percent TDS on crypto trading is a positive and constructive move by the government. “In fact, this is yet another acknowledgment by the government that cryptocurrencies and related assets like NFTs, are here to stay after having introduced the 30% cryptocurrency tax in this year's Union Budget 2022,” he said in a statement sent to ETV Bharat.
Chaudhary says the new TDS rule will bring about more transparency in crypto trading and help the government keep track of the transactions. He says instead of focusing on its inimical aspects, the question right now should be: 'What utilities are NFT projects bringing to the table?
The government has been trying to regulate the crypto currencies for quite some time and a bill for the regulation of virtual assets was supposed to be tabled in the budget session of the Parliament this year but it has been delayed. Instead of bringing the bill to end the regulatory uncertainty, the government decided to impose a 30% income tax on the profit booked on the trading of crypto currencies in the country.
Also read: 1% TDS on crypto investments in India, industry players say 'wait and watch'
Despite hectic lobbying by the crypto players and crypto exchanges, the government and the Reserve Bank of India, have been against encouraging the crypto currencies. Prime Minister Narendra Modi has warned against the use of crypto currencies and other such virtual tokens for money laundering and terror financing.
Tapan Sangal, Founder of P2E Pro, a Noida based technology company, admits that the new TDS rule coming into effect has triggered off a hype and fear that it will slow down the growth momentum of NFTs in India.
Sangal, however, dismisses these fears, saying that on the contrary, the growth momentum will only pick up from here with genuine buyers of genuine NFTs entering the market. “This way the unregulated crypto and decentralized finance world-based NFT would definitely be discouraged,” Sangal said in a statement sent to ETV Bharat. Tapan Sangal says this is not just because of the TDS rule, but the compliance and disclosures that follow such rules.
