CoinDCX TDS Report: Time for a Relook at the TDS Framework for Virtual Digital Assets

At CoinDCX, our commitment extends beyond compliance and safety; we strive to create an optimal environment for our customers and the broader Web3 ecosystem. In India, achieving these objectives requires developing policies that align the nation’s interests with a thriving, competitive environment for Virtual Digital Assets (VDAs). Our ongoing efforts include advocating with key government and non-government stakeholders, aiming to shape policies that benefit both our customers and the country. We are dedicated not just to advocacy but also to educating and empowering our customers on issues such as cybersecurity, privacy, and ownership rights. Our latest report, “Redesigning TDS for Transparency and Compliance,” embodies these efforts by presenting essential proposals to improve the tax infrastructure, thus enhancing the VDA ecosystem for all stakeholders.

Key Insights:

The report “Redesigning TDS for Transparency and Compliance” offers a thorough analysis of the necessity for a customized taxation system for Virtual Digital Assets (VDAs). This begins with the essential step of reducing the TDS rate and establishing distinctions in the treatment of various VDA transactions. Our research is driven by the following inquiries:

• Does the current TDS rate and framework for VDAs in India inadvertently encourage tax evasion?
• Can the current implementation of TDS for VDAs effectively serve as both a monitoring tool and a deterrent against non-compliant investments?
• Are VDAs being taxed in a manner consistent with the treatment of other asset classes, both domestically and internationally?
• Might a reduction in the TDS rate lure users back to compliant platforms and thereby enhance overall compliance?
• What additional adjustments could be made to improve the efficacy of the TDS scheme for VDAs?

Our findings underscore the importance of tailoring tax structures to the distinct features of digital asset transactions, which diverge significantly from traditional financial systems. Specifically, we suggest:

• Lowering the TDS rate to level the playing field between compliant and non-compliant exchanges.
• Implementing varying tax treatments for different types of VDA activities, akin to other asset classes and transactions.
• Stressing the pivotal role of enforcement capability irrespective of one’s position in the Web3 landscape, and advocating for cooperation with Virtual Asset Service Providers (VASPs) and other nations.
• Proposing a comprehensive licensing scheme, commencing with a Sandbox for currently compliant VASPs, as the foundational solution for most challenges.

With these recommendations put into effect, we contend that TDS can emerge as a potent and efficient tool for tax compliance and revenue generation, serving as the cornerstone for future VDA policy.

Call to Action

We encourage all stakeholders in the VDA ecosystem to engage with the full report to understand the potential impacts of these proposals and to collaborate with us in refining these recommendations.

Download CoinDCX TDS Report