Govt Urges to Mandate Data Storage as Tax Sops Top Crypto

Tax sops top crypto, gaming firms' budget demands; govt urged to mandate local storage of data

Tax sops top crypto, gaming firms' budget demands: The online gaming industry has urged the government to not reduce the current tax deducted at source (TDS) threshold of Rs 10,000, which is reportedly being reviewed by the finance ministry.

According to Economic Times, the crypto industry meanwhile has asked the government to reduce the 1% TDS on crypto transactions, and review income tax provisions to allow investors to offset any loss incurred during the transfer of the virtual asset against income.

State of online gaming: The government has kickstarted the process of regulating online gaming companies through proposed rules being formulated by the Ministry of Electronics and Information Technology.

Budget demands: Online gaming companies have sought clarity on the taxation structure for games based on skill by recommending that the value of supply for the industry continues to be the gross gaming revenue, which is the fee charged by a company for facilitating the participation of players.

The Finance Minister also announced that loss from a crypto asset can not be offset against the profits made on other crypto assets. The government also announced to levy 1 per cent tax deductible at source (TDS) on crypto from July 1, 2022. In December 2022, the government revealed that it collected a total of Rs 60.46 crore from VDAs transaction since July 1.

Many investors have chosen to trade their assets in international exchanges that do not have a system to deduct 1 percent TDS thus preserving their principal. The government didn't anticipate the high share of such transactions. This has created an uneven atmosphere for local compliant exchanges that cooperate with regulatory bodies, said Vikram Subburaj, CEO, Giottus Crypto Platform.

Tarusha Mittal, Co-founder and COO, UniFarm and Dapps, says, "the government should frame strong regulations for the sector in light of the FTX crisis [which wiped out billions of dollars in global investor money] especially for centralized bodies dealing with crypto."

The sector also hopes that the government would allow crypto investors to offset and carry forward their losses to create a level-playing field for virtual digital assets (VDAs) in India. Crypto bosses further expect the TDS exemption limit to be raised "to a reasonable level".

According to a report by Esya Centre, a New Delhi-based technology policy think-tank, and Taxsutra, a B2B tax portal, the current tax architecture for VDAs may lead to a loss of approximately $1.2 Tn (INR 99.3 Lakh Cr) of local exchange trade volume in the next four years relative to a pro-market scenario where (a) TDS on VDAs is at par with that on securities (b) Tax policy allows the provision to setoff losses (c) Taxation of gains from VDAs is internationally competitive.

"The idea of the government was very simple. They wanted to know how many crypto transactions are happening because they felt that a lot of people were not showing it in their returns. This is why they had this 1% TDS imposed on the seller. While most of the Indian exchanges implemented this since the rule came into implementation from July 1, foreign exchanges didn't as they are out of Indian jurisdiction…we have to remember that crypto is truly global," explained Rajgopal Menon, VP, WazirX.