Indians who gained interest in their cryptocurrencies from foreign principals have now come under the tax department’s survey.

The government is reportedly introducing an additional Tax Deducted at Source (TDS), along with an equal demand on such transactions and the interest income generated from those, two people familiar with the development.

The tax department could levy 20% TDS on such transactions, especially when one of the individuals involved in the contract has not submitted their PAN details.

Central Board of Direct Taxes (CBDT) has apparently reached out to a few tax consultants in this context to understand the logic behind how interest income from cryptocurrencies could be brought under the tax lens.

According to Roshan Aslam, CEO, and co-founder at GoSats which is a bitcoin rewards startup, this step can be understood under the shed of recent tax clarity highlighted by the Indian government and is not a major setback in any way.

The Indian government has recently launched a 30% tax on returns or profits generated from virtual digital assets while 1% TDS would additionally be applicable on every transaction from April 2022.

Finance Minister, Nirmala Sitharaman expressed that taxing income from cryptos and other Virtual Digital Assets (VDAs) should be visualized as a step to validate them as they are being taxed to ascertain the identity of those individuals who are involved in the trade.

“We haven’t said that this is currency. We haven’t said that this has intrinsic value, but certain operations are taxable for the sovereign and that is why we have taxed,” said Sitharaman in an International Monetary Fund (IMF).

In an official meeting with students and faculty at Stanford University in California, Sitharaman also revealed that India will not hurry into any decision over cryptocurrencies and other virtual digital assets, but will take a knowledgeable decision.

There is still regulatory unreliability around cryptocurrencies and decentralized finance (DeFi), with the government and central bank coming up with major announcements and statements about the crypto ecosystem in India.