New Indian Crypto Tax Regulations Are Affecting Innovation

Successful crypto trades have encouraged many Indian investors to invest even more of their money in digital assets. However, in the latest Union Budget, the Indian government has made crypto subject to tax deductions.

Last month, the Indian government started charging a 30% tax on all income from digital assets. The tax is charged on all gains from crypto assets, and it has been in effect since April 1.

In addition to this, the government decided that another 1% tax deduction will be implemented on July 1. This 1% will be charged on all crypto transactions and not just on the ones that generate profit.

The government is convinced that its TDS mechanism for crypto transactions will help track transactions as well as prevent tax evasion in India. It will also make crypto exchanges liable for depositing the tax on behalf of sellers on their platforms. However, these exchanges are seeking more clarity regarding the implementation of TDS.

These regulations are having an adverse impact on crypto trading. Some Indian stakeholders have started looking for overseas markets to retain their earnings.

An executive from WazirX added to this, saying, “what the government is unfortunately doing is that because of all these regulations, you will never have an ecosystem around crypto in India.”

The same executive also stated that the ongoing regulations could also impact innovation in the emerging crypto sector and other areas including non-fungible tokens (NFTs).

Gaurav Mehta, founder of Catax, on the other hand, believes that the TDS could be beneficial as tax evasions have always been a big problem in India.