India Crypto Tax Policy Fails To Achieve Aims, Think Tank Says

According to a new report by a technology policy think tank in New Delhi, the country’s most divisive crypto policy—a 1% transaction tax withheld at source—needs to be reduced to 0.01% to assist the government in fulfilling its objectives of increasing revenue and enhancing transparency.

Since its introduction in July 2022, the tax, also known as TDS, a type of income tax, has caused up to 5 million crypto dealers to shift their transactions abroad and has potentially cost the government $420 million in revenue, according to a study conducted by the Esya Center.

The offshore exchanges seem to be taking advantage of the benefits offered by the expanding asset (VDA) industry, in India as highlighted by Vikash Gautam, the author of the report. The data indicates that the tax has not achieved its intended goals of reducing forecast and promoting clarity in transactions.

In Feb 2022, India’s then-government (under the premiership of PM Narendra Modi) implemented a 30% tax on crypto profits and a 1% Tax Deducted at Source (TDS) on each transaction. During this announcement, FM Nirmala Sitharaman explained that the primary purpose of the TDS, which was the more controversial of these two taxes, is to enhance the visibility of the Indian Crypto space.

Crypto Tax Downturn: India’s Industry Appeals For Relief Amidst Global Concerns

On another note, various local and foreign interests worried about how their severe effects would devastate the sector. After that, the Indian crypto market underwent an unprecedented downturn, which led to all major exchanges going into survival mode for several months.

Severally, officials of the local cryptocurrency industry cry out for reduced taxes to the authorities at different times. For this research, it used trading data from 13,000 Peer-to-Peer (P2P) traders and interviewed some of the cryptocurrency exchange leaders. Also, it emerged that apart from tracking trade, TDS is aimed at countering.

In an interview, Gautam said that the idea needed to be more workable as far as the shareholders were concerned. It could involve international cooperation — something we know takes time. Some other countries have some agreements with international exchanges for monitoring that.

Crypto frauds in India: While the Indian government is trying to tax the crypto industry, it is also facing the challenge of curbing the rising number of crypto frauds in the country. Recently, BTC Politan reported that the Central Bureau of Investigation (CBI) arrested an Ahmedabad-based man for allegedly duping a US citizen of $0.93 million in a crypto scam.

Furthermore, the CBI seized cryptocurrencies, mobile phones, laptops, and bank accounts from the fraudster and registered a case against him. The CBI has also warned the public to be vigilant of such scams.

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