The government is open to resolving genuine problems and reservations of crypto-trading players arising from the new taxation regime for virtual digital assets, but is of the firm view that there is no economic rationale for lowering the proposed 30% tax on profits from crypto assets’ trading.
While a review of the 1% TDS (tax deducted at source) rate for all virtual assets’ trades could perhaps be considered, top Finance Ministry officials also pointed out that even investments in equity and debt instruments on stock exchanges which create value for the economy, involve a Securities Transaction Tax levy.
Reacting to industry fears about the tax rates, Revenue Secretary Tarun Bajaj strongly backed the 30% rate and said there was no reason to tax these assets lower than what anyone else pays on their income.
“The ultra-rich pay 42% taxes including surcharges,” Mr. Bajaj told The Hindu . “It’s not as if some economic value is created or the country’s GDP is growing (from crypto trading). If you are speculating and don’t find it feasible, stop doing it,” he said, adding that the government didn’t need to encourage such trading even though it may take a fresh look at the 1% TDS rate.
“We are looking at minor nitty-gritties,” Mr. Bajaj said, noting that the TDS levy is necessitated by the tax authorities’ realisation that collecting information about trades will be a challenge.
“This is why we are also saying no set-offs will be allowed, otherwise someone can make capital gains on equity and show losses here in your personal wallet to wallet transactions,” he noted. “TDS will be cut and if an exchange doesn’t get that done, the provisions will apply to them. So now the responsibility and accountability comes on to them.”
“If there are any reservations on which we agree, that the legislation needs to be straightened out, then of course, we will work that out,” said Central Board of Direct Tax chairperson J.B. Mohapatra. “But the fact remains that the digital virtual asset tax has been brought in to help the larger ecosystem also to remain unaffected by the supposed opacity of that segment,” he underlined.
“You should not take any message about regulatory regime from this tax. Till the regulatory regime is in place, from the tax point of view, we are not concerned if you can do derivatives or intraday trading on this,” the Revenue Secretary said.
