Investors are seeking advice on how to comply with the new tax provisions | Photo Credit: hocus-focus
Tax provisions could turn away investors: Sumit Gupta, CEO and Co-Founder, CoinDCX
Worried about the new tax provisions, particularly the one per cent tax deducted at source, crypto investors are seeking advice and asking questions of the exchanges.
According to players, many investors have got in touch with them on the tax provisions and how to comply with them, while others expect queries from April 1, when the new financial year starts.
Vikas Ahuja, CEO, CrossTower India said, “We at CrossTower have been receiving inquiries from both long-term and short-term Indian investors about the process and tax deductions since India has approved the crypto tax. Our OTC (Over the Counter) desk – which caters to long-term investors and HNIs – has received inquiries and concerns about the 30 per cent tax deduction on capital gains. Several of these investors had purchased cryptocurrencies at a low price in the past and are worried that tax deductions will erode a large chunk of their profit.
For short-term investors too, TDS of one per cent, which will be incurred while buying or selling cryptocurrency, is a major concern, he said. The lack of flexibility to offset losses from one crypto market with gains from another has been a concern for both long-term and short-term investors, and that could slow the growth of the industry.
“We have seen that inflow of funds has been muted. One of the areas where people can get taxed would be through the exchange. It is the most identifiable area. But in terms of new users and onboarding, there is not much change,” said Praveen Kumar, CEO and founder, Belfrics Group.
Another player said people were feeling more positive with the tax provisions in place and feel that the government may look at regulating the sector. “We have received some queries but expect more questions in the coming weeks, when the new fiscal starts and the tax provisions kick in,” he said.
The Lok Sabha had on March 25 passed the Finance Bill 2022, which has introduced a new scheme for taxation of virtual digital assets.
“The onerous tax provisions will not be good for the industry and can have serious consequences, including turning away both investors and developers to other countries. Under the current tax provisions, trading volumes are likely to be significantly impacted,” said Sumit Gupta, CEO and Co-Founder at CoinDCX.
The TDS requirements are extremely onerous for traders who do hundreds of transactions, and will now see a large chunk of their investable capital blocked as withholding tax, he further said.
“The industry has also not yet received the clarifications it had sought on the implementation of tax proposals, and this ambiguity may result in operational obstacles. It is the need of the hour that the government issue these clarifications before the TDS comes into effect on July 1, 2022. Such provisions are a deviation from other asset classes, and it is unfortunate that the Govt has taken this approach despite the Finance Bill defining cryptos as “virtual digital assets”,” said Ashish Singhal, Co-founder and CEO, CoinSwitch
Published on March 29, 2022