Alexander Savenkov The Indian government is being urged to reconsider its taxation policies on cryptocurrency transactions, according to a statement by a local digital asset exchange. The existing tax, enacted last year, has been criticized for inadvertently promoting a shift of trading volumes from domestic to international platforms.
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Indian Exchange Calls for Reconsideration of Tax Deducted at Source on Crypto Transactions
Last year, Indian authorities established a 1% Tax Deducted at Source (TDS) on cryptocurrency transactions, under the pretense that the primary objective was to monitor and trace these activities rather than to generate revenue. However, Coindcx, a prominent Indian cryptocurrency exchange, argues that the tax measure has been counterproductive and advocates for its reduction.
Coindcx CEO Sumit Gupta, as cited by Bloomberg, noted that 95% of trading activity in India has migrated to foreign platforms that are largely out of reach for Indian regulatory oversight. “The original objective of implementing the TDS has failed, as it has led to the opposite of its intended effect,” Gupta stated.
The tax regime has resulted in a decline in market makers on domestic exchanges due to elevated operational costs, thereby affecting liquidity and trading volume. As per the report, this stagnation occurs even as cryptocurrency markets elsewhere experience increased trading volumes.
As of April 2022, Coindcx was valued at $2.15 billion. Post-tax implementation, the company has seen its revenues plummet to approximately one-third of their pre-tax levels. Gupta disclosed that the firm has reduced its workforce by 12% and has seen a spike in compliance costs since the government applied anti-money laundering regulations to the cryptocurrency industry.
Further Regulatory Hurdles and No Respite in Taxation
In addition to the 1% TDS, profits from cryptocurrency transactions in India are subject to a 30% tax rate. Despite the contentious tax landscape, the country’s 2023 budget failed to offer any tax relief for the cryptocurrency industry or its investors and traders.
Gupta anticipates more definitive regulatory guidelines from the government post the upcoming general elections in 2024. India, currently holding the G20 presidency, has been advocating for a globally coordinated approach to cryptocurrency regulation. Ajay Seth, the Economic Affairs Secretary, indicated last month that the Indian government aims to finalize its stance on cryptocurrency in the near term.
While trading volumes on domestic exchanges have taken a hit, the adoption of cryptocurrency in India continues to gain momentum via offshore platforms and diversified financial services. Blockchain analytics firm Chainalysis estimated that Indians have acquired crypto assets worth approximately $250 billion in the year ending June.
What are your thoughts on the likelihood of the Indian government revising its cryptocurrency tax policy? We invite you to share your views in the comments section below.
Frequently Asked Questions (FAQs) about Indian Crypto Tax Policy
What is the current tax rate on cryptocurrency transactions in India?
The Indian government has imposed a 1% Tax Deducted at Source (TDS) on cryptocurrency transactions. Additionally, profits from these transactions are taxed at a rate of 30%.
What is Coindcx’s stance on the existing tax policy?
Coindcx, a prominent Indian cryptocurrency exchange, argues that the current 1% TDS is counterproductive. The company’s CEO, Sumit Gupta, states that the tax has driven 95% of cryptocurrency trading activity in India to international platforms that are largely out of the reach of Indian regulators.
Has the tax impacted the domestic cryptocurrency market in India?
Yes, the tax has negatively affected the domestic market. It has led to a decline in market makers on Indian exchanges, affecting liquidity and overall trading volume. Even as cryptocurrency markets in other countries are seeing increased activity, Indian platforms are experiencing stagnation.
What has been the financial impact on Coindcx due to the tax?
Following the implementation of the 1% TDS, Coindcx has seen its revenues drop to approximately one-third of what they were before the tax was introduced. The company has also reduced its workforce by 12% and has faced increased compliance costs.
Are there any new regulations regarding cryptocurrency in India’s 2023 budget?
The 2023 budget did not introduce any changes to the existing cryptocurrency tax regime, nor did it offer any tax relief to the industry or to crypto investors and traders.
What does Coindcx expect in terms of future regulations?
Coindcx’s CEO, Sumit Gupta, anticipates more definitive regulatory guidelines from the Indian government after the general elections in 2024.
How is the adoption of cryptocurrency faring in India despite the tax?
According to Chainalysis, a blockchain analytics firm, Indians have acquired crypto assets worth approximately $250 billion in the year ending June. This suggests that while domestic trading volumes may have declined, adoption is still increasing through offshore platforms and other financial services.
What is India’s international stance on cryptocurrency regulation?
India, currently holding the G20 presidency, is advocating for a globally coordinated approach to cryptocurrency regulation. The Economic Affairs Secretary, Ajay Seth, has indicated that the Indian government aims to finalize its stance on cryptocurrency in the near term.
More about Indian Crypto Tax Policy
- Coindcx Official Website
- Bloomberg Article on Indian Crypto Tax Policy
- Indian Government’s 2023 Budget
- Chainalysis Blockchain Analytics Firm
- G20 Official Website
- Economic Affairs Secretary Ajay Seth’s Statements on Crypto Regulation
- Previous Taxation Policies on Cryptocurrency in India
10 comments
Interesting read. The govt says it’s for tracking but they’re pushing everything offshore. Not exactly a win-win.
Govt needs to wake up! they’re losing out on a big market here and it’s all going offshore.
coindcx has lost so much. but hey, atleast they’re not folding. Hope things change after the elections.
India’s calling for a global approach but cant even sort out their own policies lol. What a paradox.
Sad to hear Coindcx had to cut staff. Hope they bounce back when the tax mess is sorted.
Wow, so the govt tax policy is basically killing their own crypto market? Sounds counterproductive to me!
Adoption is still growing tho, that’s a good sign. People will find a way, tax or no tax.
Why would they even think a 1% TDS would work? No wonder Coindcx is struggling, this needs to change and fast.
A 30% tax on crypto profits and then a 1% TDS? Greedy much, gov?
It’s a complex issue but something’s gotta give. you can’t tax an industry to death and then wonder why it’s dying.