Crypto tax may harm social cos with reward points and in-app purchases

Mumbai: The new law to tax cryptocurrencies is expected to impact rewards points and other in-app purchases offered by social media companies, dating and gaming apps, tax experts say.

In the future, social media giants like Meta or dating apps like Gleeden or even gaming apps could face a 1% withholding tax because they would be covered by the broad definition. government virtual digital assets.

Meta’s Facebook platform, for example, sells “stars” that can be gifted to content creators, while Gleeden offers credit packs to unlock chat and donation features for users – both will now fall under the broad definition of virtual digital assets and will attract 1% TDS, experts say.

Additionally, several gaming apps that allow users to purchase guns, bullets and other upgrades will now also be subject to the tax, experts say. Meta and Gleeden did not respond to emails seeking comment until press time. Twitter, which made its foray into the digital space thanks to an NFT drop on June 30 last year, did not specifically respond to questions about taxation on digital assets and its potential impact on its plans for future NFT declines, but said there were no plans for another. NFT is currently falling.

“The government has deliberately kept the definition of virtual digital assets broad due to the ever-changing landscape. As it stands, these in-app purchases or reward points, some of which are hosted on blockchain, will face 1% TDS, but the burden of complying will be on the buyer,” said Gaurav Mehta, founder of Catax, a cryptocurrency tax and audit firm.

The Minister of Finance last week introduced a 30% income tax on returns from digital currencies.

Discover the stories that interest you

The government has also introduced a 1% TDS on digital assets. The government, however, did not use the word “cryptocurrency” in the guidelines announced in the budget but virtual digital assets.

Tax experts claim that this would not only impact Points, Coins, or any other in-app purchases, but the Metaverse as well.

Metaverse events where rock concerts or weddings take place and where users can buy clothes or other virtual gifts will be impacted and may have to cough up TDS and a 30% tax on those who receive the gifts.

“We are consulting tax experts because there is no clarity on the implementation side. Many users have contacted us and we have many users who are not Indian citizens but are trying to find out their location,” said Rajat Ojha, CEO of Hyderabad-based Gamitronics, which launched the PartyNite platform on 26 January with the first Indian Metaverse. concert with Indian artist Daler Mehndi.

Some NFTs were also dropped during the event.

India recently held a first metaverse event where a couple from Tamil Nadu got married on a 3D metaverse which was attended by around 500 guests. If any of the invitees offered either a crypto asset or anything that could be purchased, converted, or valued for money, a 30% fee would apply.

Prashant Puri, CEO of digital marketing firm AdLift, said implementing 1% TDS across Apple, Android and the entire app ecosystem would be a daunting task.

“The whole app ecosystem works around tokens and digital money. Digital assets are a very gray area,” he said. The head of a digital media and Live Entertainment said the new laws were being “reviewed”.

Some tax experts also question how the 1% TDS will be calculated.

“So if I buy balls on the metaverse or in a game, do I have to take 1% every time I buy the ball? Or 1% is applied on each game?” asked Rahul Garg, managing partner tax and regulatory consultants Asire Consulting.

Stay on top of tech news and startups that matter. Subscribe to our daily newsletter for the latest must-have tech news, delivered straight to your inbox.

About Donald J. Beadle

Check Also

New Profile Pic app: Does Russia collect personal data from Facebook users?

It’s a new internet craze that turns your Facebook profile picture into a painting or …