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Banks face reversal of fortune from inflation

May 06, 2022

Banks face reversal of fortune from inflation

Indians earning “interest” on their cryptocurrencies from platforms outside India have come under taxman’s scrutiny, two individuals familiar with the development said.

The tax department is looking to slap additional tax deducted at source (TDS) and equalisation levy on such transactions and interest pay produced by Indians, they said.

The move comes when decentralized finance (DeFi), which is the financial environment based on blockchain applications and can be used for remitting money or buying insurance, or even borrowing money against cryptocurrencies, is quickly 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 government is looking to 20% TDS on these transactions, particularly when one of the persons who has entered the contract has not submitted their PAN card details, an individual aware of the development said.

CBDT has reached out to some tax experts in this regard to figure out how interest income from cryptocurrency could be brought under the tax lens. The government recently introduced a 30% tax on returns or profits made from virtual digital assets. From April this year, 1% TDS is also applicable on every transaction.

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