SUMMARY
The tax department could levy 20% TDS on such transactions
Central Board of Direct Taxes (CBDT) has reportedly reached out to a few tax experts in this regard
Crypto space is new, with innovations in the sector happening quite fast, so it will be interesting to see how the TDS part is implemented: GoSats’ Roshan Aslam
Indians who earn interest on their cryptocurrencies from foreign platforms have now come under the tax department’s scrutiny.
The government is reportedly mulling introducing an additional tax deducted at source (TDS), along with an equalisation levy on such transactions and the interest income generated from those, two people familiar with the development told ET.
The tax department could levy 20% TDS on such transactions, especially when one of the persons involved in the contract has not submitted their PAN details, the person aware of the development told the publication.
Central Board of Direct Taxes (CBDT) has reportedly reached out to a few tax experts in this regard to understand how interest income from cryptocurrencies could be brought under the tax lens.
According to Roshan Aslam, CEO and cofounder at GoSats, a bitcoin rewards startup, this move can be understood in the light of the recent tax clarity given by the Indian government and is not a major setback in any way.
“However, the space is quite new with innovations in the sector happening quite fast, so it will be interesting to see how the TDS part for this will be implemented,” Aslam said.
The Indian government has recently introduced a 30% tax on returns or profits made from virtual digital assets while 1% TDS would also be applicable on every transaction from April this year.
Finance Minister Nirmala Sitharaman said last month that taxing income from cryptos and other virtual digital assets (VDAs) should be seen as a step to legitimise them as they are being taxed to ascertain the identity of those involved in the trade.
“We haven’t said that this is currency. We haven’t said that this has intrinsic value, but certain operations are taxable for the sovereign and that is why we have taxed,” said Sitharaman in a discussion organised by the International Monetary Fund (IMF).
Just a week later, during an interaction with students and faculty at Stanford University in California, Sitharaman also stated that India will not rush into any decision over cryptocurrencies and other virtual digital assets, but will take an informed decision.
There are still regulatory uncertainties around cryptocurrencies and decentralised finance (DeFi) at large, with the government and central bank coming up with abrupt announcements and statements about the crypto ecosystem in India.
Interestingly, India was ranked 6th in the Global DeFi Index last year, based on the metrics such as on-chain DeFi value received, on-chain number of DeFi deposits and on-chain retail DeFi value received, according to a Chainalysis report.
