Government May Lose Millions in Crypto Tax Revenue: WazirX Founder Nischal Shetty

The government announced in Budget 2022 its intention to levy a 1% TDS on all crypto/virtual digital asset transfers. On Tuesday (March 8), Finance Minister Nirmala Sitharaman stated that the government is looking into the possibility of generating revenue through cryptocurrency.

The announcement was made not only about the 1% TDS on crypto transfers, but also about a flat 30% tax on profits from crypto transactions.

Individual investors and traders, as well as stakeholders in the cryptocurrency industry, have been calling for a reduction in the crypto tax and TDS rate.

According to WazirX founder Nischal Shetty, a 1% TDS on cryptocurrency trading would result in a significant loss of tax revenue for the government.

In a series of Tweet, he explained himself to support his claim

In the first tweet WazirX founder Nischal Shetty said, “Crypto assets of Indians would be around $3B If we assume a net profit of 10% overall, total profit for Indians would be $300M At 30%, that’s $100M payable income tax Which means, Indian Gov would need to refund $900M in TDS each year.”

He also added “By locking this $900M, the Gov would cripple traders and prevent them from trading due to lack of capital Effectively, this would drastically reduce the potential to earn profit This in turn would affect the $100M in income tax earnings of the government”

According to his calculation 

1. Trading volume goes low
2. Trading profits go down
3. Large number of TDS refunds need to be processed
4. Massive income tax loss to the Government

“An absolute lose-lose situation for both, Govt. as well as the people”

Solution given by him:

“0.1% TDS Which would mean $100M in TDS. That’s the income tax generated from our calculations above Very little to refund, traders don’t get affected much, they can continue to trade and make more profits.”

“More profits = more income tax for the Government“

Other popular opinion on “1% TDS on Crypto”

Vikram Subburaj, Co-Founder and CEO of Giottus Cryptocurrency Exchange, stated that with a 1% TDS on crypto trading, frequent traders may run out of capital for each trade. He stated that short-term traders would require clarification on how much capital can be locked against a PAN card in a year.

Nithin Kamath, CEO and co-founder of Zerodha, also stated that cryptocurrency volumes in India will fall off a cliff on July 1st, 2022, shortly after its implementation.

On the other hand, stakeholders in the crypto industry, including crypto investors and traders, are calling for a reduction in the crypto tax and TDS rate.