India’s Crypto Tax Problem Causes Calls for Cuts and Clear Rules
India’s cryptocurrency market is grappling with challenges stemming from high taxes and regulatory ambiguity. Former MP Ritesh Panday has advocated for a reduction in the steep 30% tax rate, the removal of the 1% tax deducted at source (TDS), and the establishment of transparent guidelines to foster the growth of the crypto sector.
Over-Regulation Could Stifle Development
Ritesh Panday has shed light on the complexities faced by Indian crypto enthusiasts when conducting transactions such as purchasing non-fungible tokens (NFTs). He underscores how the current tax framework, which imposes a 1% TDS at each stage, impedes innovation and growth in this burgeoning industry, particularly among the youth.
India’s Crypto Tax Landscape
Despite the absence of formal crypto regulations in India, users are burdened with a hefty 30% tax on profits and a 1% TDS on all transaction amounts, irrespective of the deal size. Recent developments, like Bybit’s imposition of an 18% Goods and Services Tax (GST) on various crypto services, have exacerbated the tax challenges.
Impact of Heavy Taxes on Offshore Trading
Sumit Gupta from CoinDCX notes that the stringent tax policies have incentivized Indian traders to shift over $42 billion in trading volume to international platforms, leading to significant revenue losses for the Indian government.
Challenges and Concerns in the Indian Crypto Space
Despite the lack of clear regulatory guidance, Indian crypto exchanges are grappling with compliance issues related to anti-money laundering regulations. Security breaches at major exchanges like CoinDCX and WazirX have raised concerns about asset protection. The absence of a robust mechanism to monitor crypto income poses challenges in tax enforcement.
The COINS Act 2025: A Step Towards Reform
The proposed COINS Act 2025 by Hashed Emergent outlines comprehensive reforms including self-custody rights, tax restructuring, and the establishment of a dedicated regulatory body. While the Act is not yet enacted, it offers a progressive framework to position India as a frontrunner in Web3 technologies.
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India’s crypto tax landscape underscores the necessity for balanced regulations to foster innovation and advancement in the industry. The COINS Act 2025 presents a forward-looking approach to address the challenges confronting the Indian crypto community.
