May 4, 2022
By Anjali Kochhar
A new report has shown that Indians earning interest on their digital assets from platforms outside India have come under taxman’s scrutiny.
The Economic Times quotes sources as saying that the tax department is looking to levy an additional 20% tax deducted at source (TDS) and equalization levy on such transactions and interest income generated by Indians.
The move comes at a time when decentralized finance (DeFi) is fast gaining traction, and many Indians have now taken to earning interest income by depositing cryptocurrencies for a fixed period of time with the platform.
The tax authority has reached out to some tax experts in this regard to figure out how interest income from cryptocurrencies could be brought under the tax lens.
The government recently introduced a 30% tax slab on returns or profits made from virtual digital assets. From April this year, 1% TDS is also applicable on every transaction.
“For the tax department tracking of these transactions is very crucial. The government could slap a 5% additional tax in the form of equalization levy on any transaction where one of the persons is not based in India and has not submitted their PAN card or other tax details,” Girish Vanwari, founder of tax advisory Transaction Square, told The Economic Times.
Many Indians have taken to earning interest income by depositing cryptocurrencies for a fixed period with the platform.
“In case of non-residents, the withholding on interest is at 20% plus applicable surcharge and cess as per the income-tax act or the treaty, whichever is more beneficial and 10% plus applicable surcharge and cess for residents. The income-tax department is yet to issue specific guidance on the same since this is an unregulated space as of now,” Amit Maheshwari, tax partner at tax consultancy firm AKM Global, told ET.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
