Union Budget 2023: India should consider reducing TDS rate on cryptocurrency trade, says report

timesofindia.indiatimes.com:

The 'Impact Assessment of 1 per cent TDS on VDAs' report by Chase India and Indus Law said the crypto platforms/exchanges must also perform customer due diligence which can help uncover any potential future risk. «The existing 1 per cent 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,» it said.

The government, from April 1 last year, has brought in a 30 per cent income tax plus surcharge and cess on transfer of virtual digital assets (VDAs), including cryptocurrencies, like Bitcoin, Ethereum, Tether and Dogecoin. Also, to keep a tab on the money trail, a 1 per cent TDS has been brought in on payments over Rs 10,000 towards virtual digital currencies.

«The purpose of the TDS is to establish a trail of crypto transactions, and the same can be achieved by a lower TDS rate. A nominal TDS rate would also support tracking and tracing of transactions, thus aiding in tax collections if Indian investors continued to trade from Indian KYC enabled platforms,» said the report, which came days before the 2023-24 Union Budget slated on February 1.

It also suggested that for the purpose of safety and oversight, the government must ask all crypto exchanges/platforms to conduct a detailed e-KYC authentication on all investors/traders in line with the Aadhaar rules. In the joint report Chase India and Indus Law also said that many exchanges have not been following the said TDS rules despite coming under the legal purview and mandate of conducting business under other Indian laws and regulations.

Many exchanges have been found to exempt this in their business practice with an unauthorised discretion. This