India’s crypto market faces a wave of discontent regarding the 1% Tax Deducted at Source (TDS) imposed on crypto transactions. Introduced in July 2022 alongside a 30% tax on crypto gains, the TDS has drawn criticism for its potential to stifle the burgeoning industry.

Proponents of the TDS argue it helps track transactions and improve tax collection. However, critics point out several drawbacks:

  • Reduced Trading Volume: The additional tax burden is seen as a disincentive for investors, potentially leading to a decline in trading activity.
  • Market Inefficiency: The TDS is deducted at the time of sale, irrespective of whether the investor makes a profit or loss. This can lead to an unfair tax burden for those incurring losses.
  • Administrative Hurdles: The TDS compliance process adds complexity for crypto exchanges and investors, potentially hindering smooth transactions.

These concerns have led to calls for reform. Some experts suggest lowering the TDS rate, while others advocate allowing investors to offset TDS with their eventual capital gains tax liability.

The Indian government has yet to address these concerns publicly.

However, the ongoing debate highlights the need for a balanced approach that fosters innovation and protects investors while ensuring the government receives its fair share of tax revenue from the crypto sector.


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