Indians earning “interest” on their cryptocurrencies from platforms outside India have come under taxman’s scrutiny, two people 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 income generated by Indians, they said.
The move comes at a time when decentralised finance (DeFi), which is the financial ecosystem built on blockchain applications and can be used for remitting money or buying insurance or even borrowing money against cryptocurrencies, 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 government is looking to levy 20% TDS on these transactions, especially when one of the persons who has entered the contract has not submitted their PAN card details, a person aware of the development said.
CBDT 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 30% tax on returns or profits made from virtual digital assets. From April this year, 1% TDS is also applicable on every transaction.
The government is also exploring whether these transactions could also attract equalisation levy.
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