Binance CEO Changpeng Zhao mentioned India’s high crypto taxes as something that can kill the Indian cryptocurrency sector. He said this while speaking at the Singapore Fintech Festival.
“India has high tax which is probably going to kill the industry,” he said. He was referring to the 1% transaction tax and 30% capital gains tax introduced through the annual budget for 2022-23 and became effective from April. The transaction tax that kicks in once the transaction value exceeds Rs 10,000 (USD125) in a financial year. This low threshold ensures that virtually all crypto transactions fall under the taxation net.
As a result, investors have stayed away from crypto trade or at least Indian crypto exchanges that can’t avoid implementing the tax provisions like their foreign counterparts. Trading volumes have fallen sharply across all Indian crypto exchanges. Given the slump in trading volume, WazirX laid off 40% staff last month.
The three-day Singapore Fintech Festival is an important event for global financial services, banks, regulatory bodies, and policymakers. This year, SFF has over 850 speakers and 60,000 participants.
Recently, the Indian tax authority released a comprehensive draft Income Tax Return (ITR) form that it wants to introduce and replace a few existing ITR forms. The draft form has new fields that seek information about foreign businesses that have an Indian user base. This is significant given that a majority of Indian crypto and web3 startup founders and promoters have incorporated their businesses overseas while their user base is primarily Indians.
From the tax point of view, the Indian government may want to tax the earnings made from the Indian market something that it does with foreign e-commerce platforms and online service providers in the form of an equalization levy, introduced in 2016.
In 2019, Binance announced to have taken over the Indian crypto exchange WazirX. In August this year, CZ and WazirX CEO Nischal Shetty were involved in a public spat on Twitter over the ownership of WazirX. CZ claimed that the acquisition of WazirX by Binance was not complete and Binance only offered technical solutions to WazirX such as the wallet service.
The Indian government and financial sector regulators have been pitching for uniform and global regulation for the cryptocurrency sector. Recently, Indian Finance Minister Nirmala Sitharaman said that India as the G20 President would work towards tech-driven regulations for the cryptocurrency sector.