India: $3.8B Worth Crypto Moved To Foreign Exchanges Post 30% Tax Rule

Lavina Daryanani
Source: Outlook India

Esya Centre, a technology policy commission, recently revealed that Indians have been sending their crypto funds to non-Indian platforms. From February to October 2022, Indians transferred $3.8 billion [₹32,000 crores] in aggregate trade volume from domestic to international exchanges.

Out of that, a total volume of $3.05 billion was sent within the 1st six months of the current financial year.

Last year, the Indian government imposed hefty taxes on crypto trading. In February 2022, India imposed a 30% tax on income from the transfer of virtual digital assets. Furthermore, neither deductions nor exemptions were allowed.

This was accompanied by a 1% TDS announcement on the payments made for the transfer of digital assets. Additionally, the RBI clarified that any digital asset transaction loss could not be set off against any other gain.

1.7 Million Crypto Users Migrate

Esya Centre’s researchers chalked out the repercussions of the aforementioned moves. They said that they expect a negative impact on tax revenues and a decrease in transaction traceability.

Vikash Gautam, Adjunct Fellow at Esya Centre said,

“The tax policy seems to have overlooked two important aspects: Tax rates, like price changes, not only decrease consumption of a given product (i.e., trading through Indian VDA exchanges), but shift demand towards other products (i.e., trading through foreign VDA exchanges). National boundaries are porous in the digital economy, so staying internationally competitive is critical.”

Post crypto tax announcement, an estimated 1.7 million users switched to foreign exchanges during the period studied. The think tank estimated that the current tax structure could result in a loss of around $1.2 trillion in local exchange trade volume over the next four years.

Gautam added,

“The government should consider lowering the TDS rate to reduce its distortionary effect, especially since any TDS rate can meet the transaction tracking purpose.”

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