India’s 1 Percent TDS on Crypto Transactions Needs to be Slashed to 0.01 Percent

 

India's imposition of a one percent Tax Deducted at Source (TDS) on cryptocurrency transactions is under scrutiny, with a recent study from Delhi-based think tank Esya Centre proposing a reduction to 0.01 percent. Currently taxed at 30 percent, crypto gains in India face additional TDS, implemented in July last year. Despite a year passing since the introduction of these tax laws, the crypto sector in India is experiencing a prolonged slowdown, prompting calls for a reconsideration of the TDS rate.

1. Esya Centre suggests slashing India's one percent TDS on crypto transactions to 0.01 percent.
2. Current tax laws, initiated in July last year, have led to an estimated loss of $420 million in the Indian crypto market.
3. The Bharat Web3 Association criticizes the TDS law, but no government initiative for change has been observed.

 India's cryptocurrency landscape faces challenges as the Esya Centre recommends a significant reduction in the one percent TDS on crypto transactions to stimulate growth in the sector. Despite the initial intention of discouraging speculative activities and enhancing traceability in the virtual digital asset (VDA) ecosystem, empirical analysis by Esya suggests these goals remain unmet. The report, titled 'Impact Assessment of Tax Deducted at Source on the Indian Virtual Digital Asset Market,' indicates a continued decline in crypto engagement in India over the past year.

Since the introduction of the TDS law, the daily transaction volume on major Indian exchanges, including WazirX and CoinDCX, has reportedly dropped from $10 million to $5.6 million. The Bharat Web3 Association, representing Indian crypto and Web3 players, has voiced criticism without seeing any government action.

The slowdown has led to job cuts in domestic exchanges, with CoinDCX laying off twelve percent of its workforce. Additionally, Indian crypto traders are reportedly turning to international exchanges due to the unfavorable tax environment. Despite appeals from various quarters, including a report from Chase India and Indus Law, the government has yet to respond. The impact of the TDS is evident in India's absence from the list of the world's most crypto-ready nations by August 2022.

While the crypto community urges reconsideration, only 0.07 percent of Indian crypto owners are estimated to have declared and paid their taxes in 2022, revealing a significant gap between tax obligations and compliance. The government's response remains awaited amid concerns about lost revenue and opportunities for India's digital economy.