The cryptocurrency landscape in India has undergone a seismic transformation since the contentious introduction of the Tax Deducted at Source [TDS] in 2022. In the wake of dwindling digital asset transactions, prominent figures within the industry have raised concerns. Sumit Gupta, the CEO of CoinDCX, India’s first crypto unicorn, has emerged as a leading advocate for lobbying the government for a reduction in the TDS rate from 1% to a mere 0.01%.
The previous year witnessed the implementation of a flat 30% tax on all crypto income in the nation, coupled with the imposition of a 1% TDS on crypto trades exceeding 10,000 Indian rupees [approximately $122]. Shockwaves from these tax measures were felt across the cryptocurrency landscape, prompting an estimated $3.85 billion in capital to migrate from domestic centralized crypto exchanges to foreign counterparts between February and October 2022, all in an effort to evade the tax burden, as reported by the Indian think tank, Esya Centre.
In a previous interview, Sumit Gupta argued that reducing the TDS rate to 0.01% could yield a win-win scenario. Firstly, it might entice traders back to Indian exchanges, aligning with the government’s objective of tracking virtual digital asset [VDA] transactions to combat money laundering. Secondly, it would contribute to the country’s tax revenue. Gupta further advocated for the tax treatment of crypto trading on par with other asset classes, such as equities.
Indian Crypto Exchanges: The Future
CoinDCX, valued at over $2 billion, plays a pivotal role as a founding member of the Bharat Web3 Association, an industry lobbying group. This collective has been actively advocating for clarification of the legal status of digital assets and the allowance of crypto traders to offset losses against other investment gains for tax purposes.
Despite these efforts, Nischal Shetty, the CEO of the WazirX exchange, cautioned that a transition to a more lenient crypto tax regime in India might still be a couple of years away. Shetty explained, “I don’t think we’ll see any immediate reduction in TDS since there have been no formal discussions between the industry and lawmakers specifically around it.”
India’s stance on cryptocurrency appears to be poised for transformation, as articulated by the Finance Minister. Ajay Seth, Secretary of the Department of Economic Affairs, announced during the recently concluded G20 leaders’ summit that “India’s approach to crypto will be determined in the coming months.”
He underscored that the G20 had established a framework for assessing risks, and India would base its policy decisions on the global consensus forged by world leaders. The crypto landscape in India stands at a crossroads, with the future direction hanging on the balance between taxation and industry growth.