Indians Moved Over $3.8 Billion to Foreign Exchanges Since Crypto Tax Rules

Indians moved more than $3.8 billion in trading volume from local to international crypto exchanges after the country announced stiff crypto tax rules last February, according to a research study by Esya Centre, a New Delhi-based technology policy think tank. A total of $3.85 billion was shifted from February through October, the study said. CoinDesk reports: The report provides the first monetary estimate of the impact of India's controversial crypto tax policy on domestic exchanges. Prime Minister Narendra Modi's government announced a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions on Feb. 1, 2022. The 30% tax went into effect on April 1, and the 1% TDS on July 1. When the taxes were announced the industry was unable to back up its prediction that the levies would "kill liquidity." The Esya Centre report found that domestic exchanges lost 81% of their trading volumes in four months after the imposition of the much debated 1% TDS rule. The report said that India's virtual digital-asset (VDA) industry is "crippled under the current tax architecture" and that the "baseline scenario" under the current structure is that "almost all" Indian centralized VDA users will move to a foreign exchange. The researchers recommend TDS should be changed from 1% per transaction to 0.1%, which would be on par with the securities transaction tax. They also recommend allowing losses to offset gains and establishing progressive taxes on gains instead of the flat 30% tax. As a current account deficit nation at an all-time high of $36.4 billion, India requires money to flow in as opposed to outflows to offshore exchanges that bypass banking channels. The latest findings might put pressure on authorities to clamp down on outflows through crypto that add to India's current account deficit.

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