India's 1% Crypto Tax Drives Trading Offshore: A Deep Dive
A new study has revealed that nearly 90% of crypto currency trading in India has shifted to offshore platforms after the government levied 1% tax deducted at source (TDS). This drastic shift underscores the significant impact of India's tax policy on the crypto market and raises serious concerns about capital flight and lost revenue.
The Tax Deducted at Source (TDS), has led roughly 5 million Indian crypto traders to move their transactions offshore. This capital flight has cost the government a significant amount in potential tax revenue, highlighting the unintended consequences of the current policy.
India's most controversial crypto policy, a 1% transaction tax deducted at source, needs to be lowered to 0.01% to help the government achieve its aims of boosting the domestic crypto industry and retaining investors within the Indian market. Experts believe that a lower TDS would encourage more traders to remain in India, contributing to a healthier and more regulated crypto ecosystem.
Indian crypto investors who thought they could dodge taxes by trading on foreign platforms like Binance are in for a rude awakening. The Income Tax department is now actively tracking and pursuing those attempting to evade taxes by using offshore exchanges. The government is collaborating with international tax authorities to ensure compliance and prevent tax evasion, making it increasingly difficult for traders to hide their offshore crypto activities.
The study further emphasizes the urgent need for the Indian government to re-evaluate its crypto tax policy. While the intention was to increase tax revenue and regulate the crypto market, the 1% TDS has inadvertently driven trading activity offshore, resulting in a loss of potential tax revenue and hindering the growth of the domestic crypto industry. A more balanced approach, possibly involving a lower TDS rate and clearer regulatory guidelines, could encourage greater participation in the Indian crypto market and ensure compliance without stifling innovation.