RajkotUpdates.News: Government May Consider Levying TDS/TCS on Cryptocurrency Trading
Cryptocurrency has been gaining widespread popularity and acceptance globally in recent years. With the rise in its use, there has been a growing debate around the regulation of cryptocurrency trading. In India, the government has been grappling with the issue of regulating cryptocurrency and may consider levying TDS/TCS on cryptocurrency trading. This article aims to provide an overview of the government’s plan to regulate cryptocurrency and the potential impact of levying TDS/TCS on cryptocurrency trading.
Introduction
The government has been looking to regulate cryptocurrency trading in India, as it is largely unregulated at present. The Reserve Bank of India (RBI) had earlier issued circular banning banks and other financial institutions from dealing with cryptocurrencies. However, this circular was struck down by the Supreme Court in March 2020, paving the way for the growth of the cryptocurrency industry in India.
Government’s Plan to Regulate Cryptocurrency Trading
The government has been taking steps toward regulating cryptocurrency trading in India. In January 2021, the Finance Ministry formed a committee to examine the issue of regulating cryptocurrencies. The committee submitted its report in February 2021, recommending that the government should consider a blanket ban on private cryptocurrencies while allowing the use of blockchain technology and a digital version of the Indian rupee.
The government has not yet implemented the committee’s recommendations, but it has indicated that it may consider levying TDS/TCS on cryptocurrency trading.
What is TDS/TCS?
TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) are methods of collecting tax at the source of income. TDS is deducted by the payer of income and deposited with the government on behalf of the payee. TCS is collected by the seller from the buyer and deposited with the government on behalf of the buyer.
Impact of Levying TDS/TCS on Cryptocurrency Trading
If the government decides to levy TDS/TCS on cryptocurrency trading, it would mean that tax would be deducted/collected at the source of income. This would increase the compliance burden on cryptocurrency traders and exchanges. It would also bring cryptocurrency trading under the tax net, which could lead to greater scrutiny by the tax authorities.
However, levying TDS/TCS could also help the government keep track of cryptocurrency transactions and prevent tax evasion. It would also bring cryptocurrency trading on par with other financial transactions, which are subject to TDS/TCS.
Challenges in Levying TDS/TCS on Cryptocurrency Trading
One of the major challenges in levying TDS/TCS on cryptocurrency trading is the lack of clarity around the legal status of cryptocurrency in India. Cryptocurrency is not recognized as a legal tender in India, and there is no clear regulatory framework governing its use.
Another challenge is the difficulty in determining the source of income in cryptocurrency trading. Cryptocurrency transactions are anonymous and can be conducted from anywhere in the world, making it challenging to determine the source of income.
Conclusion
The government’s plan to regulate cryptocurrency trading in India is a welcome step toward bringing transparency and accountability to the sector. Levying TDS/TCS on cryptocurrency trading could be an effective way to bring it under the tax net and prevent tax evasion. However, there are several challenges that need to be addressed before this can be implemented.
