India's crypto tax revenue surges with one percent TDS, attracting global attention
India collects $12 million from one percent crypto tax as traders turn to global exchanges.
Highlights
- India's CBDT has collected $12 million from a one percent TDS on crypto transactions due to a surge in crypto activity
- India's regulatory stance on crypto has shifted from considering a ban to promoting a global framework
- Many Indian traders have turned to international exchanges to avoid TDS, moving billions of dollars offshore
In a bold move to regulate the surging crypto industry, India's Central Board of Direct Taxes (CBDT) implemented a one percent Tax Deducted at Source (TDS) on crypto transactions from 1 July, 2022. This step was followed by a remarkable increase in crypto transactions in the country, prompting the government to take action.
The Finance Minister, Nirmala Sitharaman, highlighted the ‘phenomenal increase’ in crypto activities as the driving force behind this new tax regime.
Tax collection soars
Since the initiation of the one percent TDS on crypto transactions, the CBDT has collected more than 100 crore INR (equivalent to $12 million) during this financial year. However, it's important to note that this figure does not encompass the income tax garnered by the government, which stands at a substantial 30 percent on profits from the transfer of crypto assets.
In a recent interview with ANI, the Chairman of CBDT disclosed that they've amassed over 700 crore INR ($84 million) from TDS this fiscal year, including both online gaming companies and crypto transactions. The significant portion, over $12 million, was solely from taxes on crypto dealings.
India's shifting regulatory landscape
India's approach to crypto regulations has undergone a remarkable transformation within the last year. Previously, the government had contemplated an outright ban on cryptocurrencies. However, it now advocates for a global framework for regulating this burgeoning industry.
The one percent TDS, while not a ban, is part of the government's strategy to oversee and manage the adoption of crypto in the world's most populous nation.
Global exodus to international exchanges
The implementation of these tax policies has prompted a sizeable exodus of Indian crypto traders to international exchanges where TDS is not enforced. According to industry estimates, an estimated 36,000 crore INR (approximately $4.3 billion) has migrated to international exchanges since these tax policies came into effect.
Gaurav Mehta, co-founder of Catax, a crypto taxation assistance platform, emphasised the need for prompt clarity on the applicability of TDS on international exchanges. Establishing clear processes and implementing robust disclosure mechanisms could enhance compliance and boost overall tax collection figures.
India's introduction of a one percent TDS on crypto transactions is a significant step in the ever-evolving landscape of crypto regulations. With remarkable tax revenues and a surging adoption of cryptocurrency, the country has made substantial strides in regulating the sector while also attracting attention to the global crypto adoption index.
As the government continues to navigate this uncharted territory, the future of crypto in India remains a topic of keen interest and observation.
