India Loses $420 Million in Crypto Tax Revenue
The Indian government has experienced a loss of $420 million due to its crypto taxation policies, prompting traders to move their transactions abroad. Experts are recommending that the government should reconsider its stance on crypto taxation and make adjustments to increase revenue and transparency.
Taxing Times for Indian Crypto Traders
The 1% transaction tax deducted at the source (TDS), considered a form of income tax, has led to approximately five million crypto traders shifting their transactions offshore. The implementation of this tax has resulted in a potential revenue loss of $420 million for the government since July 2022. Contrary to its purpose, the tax has not achieved its goal of taxing profitable transactions.
A recent study by Delhi-based think tank Esya Centre revealed that Indians redirected over $3.8 billion in trading volume from local to international crypto exchanges following the announcement of the controversial rules. This transition led to a surge in web traffic, active users, and downloads from Indians on offshore platforms post-July 2022.
Additionally, only 0.2% of trading on offshore VDA exchanges is TDS compliant, highlighting the strong inclination for relief from the 1% TDS. The study recommends reducing the TDS to 0.01% and providing clarity regarding the scope of TDS on offshore platforms.
Calls Escalate to Ease Crypto Tax Rules
The recommendation aligns with increasing calls from various players in the crypto space within India urging a reduction in the tax burden on crypto transactions. Amidst these challenges, Indian crypto exchanges have implemented cost-cutting measures and explored alternative revenue streams while awaiting a much-needed regulatory framework.
Hot Take: The Impact of India’s Crypto Taxation Policy
India’s current crypto taxation policy has caused significant revenue loss and led to an exodus of traders to offshore platforms. To address this issue, experts recommend reducing the TDS rate and providing clarity regarding offshore platform regulations. The country’s crypto industry is eagerly awaiting a more favorable regulatory framework that will alleviate tax burdens and create a more conducive environment for domestic trading platforms.
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