The Lok Sabha today approved the Finance Bill, which gives effect to new taxation on transactions involving digital assets. The bill proposes a 30 per cent tax on capital gains out of virtual digital assets. Once passed into law, a 1 per cent TDS would also be imposed on every such transaction.
During the debate on the Finance Bill in Lok Sabha, the Opposition said that the government is still sending mixed signals on virtual digital assets, and asserted there should be clarity on the definition of crypto.
Bahujan Samaj Party (BSP) leader Ritesh Pandey said that introducing the 1 per cent TDS on blockchain transactions is going to hamper the way this business is done.
Mr Pandey explains how the tax will work with an example. In the first transaction, a user will buy a cryptocurrency. They will then transfer it to a wallet. Using the balance in the wallet, the user can buy a non-fungible token (NFT).
The user will be charged a 1 per cent TDS at each of these three stages.
"When you impose a 1 per cent TDS at three stages, it will give birth to red tapism. Doing so will also finish this asset class, which is very young," the BSP leader said.
"Amitabh Bachchan has launched his NFT. And if a user wants to buy an NFT of their favourite movie's poster or a star's autograph, they will have to pay TDS three times," the BSP leader says in the Lok Sabha.
India with nearly 1.4 billion people is one of the world's fastest-growing markets for cryptocurrency trading, but the country has had a hot-and-cold relationship with virtual coins. The Reserve Bank of India had effectively banned crypto transactions in 2018, but the Supreme Court struck down the restriction last year.