Think Tank Urges India to Slash Controversial Crypto Tax After It Falls Short of Goals

"Technology Think Tank Urges India to Lower Controversial Crypto Tax Policy to 0.01% for Economic Boost"

Indian Crypto Tax Policy Needs to be Lowered, Think Tank Suggests

A technology policy think tank based in New Delhi has proposed that India’s controversial 1% tax deducted at source (TDS) crypto tax policy should be reduced to 0.01%, according to a new study. The think tank argues that lowering the tax rate would help the government achieve its goals of increasing revenue and enhancing transparency in the crypto market. The TDS tax, which is a form of income tax, has led to approximately 5 million crypto traders moving their transactions offshore. Since its implementation in July 2022, the tax has cost the government an estimated $420 million in potential revenue. The findings of the study, conducted by the Esya Centre, build upon a previous report that revealed Indians had shifted over $3.8 billion in trading volume from local to international crypto exchanges following the announcement of the controversial crypto rules. The study highlights that the tax has failed to achieve its intended objectives of curbing speculation and creating transparency around transactions in the virtual digital asset (VDA) market.

Vikash Gautam, the author of the report, stated, “While the VDA market in India is burgeoning, the benefits of the same are being reaped by offshore exchanges. Data shows that two likely policy objectives of the tax – to curb speculation and create transparency around transactions – have not been achieved.” The tax policy was announced by Prime Minister Narendra Modi’s government in February 2022, along with a 30% tax on crypto profits. The aim of the TDS tax was to increase traceability within India’s crypto ecosystem. However, the implementation of the tax led to a significant decline in Indian crypto traffic and put major exchanges in survival mode. Representatives from the domestic crypto industry have repeatedly appealed to the authorities to lower the taxes.

The study, which analyzed transaction volumes from 13,000 peer-to-peer (P2P) traders and surveyed crypto exchange executives, also called on the government to clarify the applicability of TDS to offshore platforms. Gautam emphasized the difficulty of enforcing the tax on international exchanges without international cooperation. He noted that some countries have arrangements with international exchanges to track transactions, but this process would require significant time and effort.

The Finance Ministry has not yet responded to a request for comment on the study. The crypto industry in India continues to face uncertainty and challenges due to the tax policies, and stakeholders are eagerly awaiting a response from the government. Lowering the tax rate could potentially help revive the industry and encourage more participation from domestic traders.

In conclusion, the study by the Esya Centre highlights the shortcomings of India’s 1% TDS tax policy on crypto transactions. The tax has not achieved its intended objectives and has led to a significant loss of revenue for the government. Lowering the tax rate to 0.01% could potentially address these issues and boost the crypto industry in India. However, further clarification and international cooperation are needed to effectively enforce the tax on offshore platforms. The government’s response to the study and the appeals from the domestic industry will be crucial in determining the future of crypto taxation in India.

Martin Reid

Martin Reid

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