According to Minister of State for Finance Pankaj Chaudhary, Indian tax authorities collected Rs 158 crore (approx. $19 million) in TDS on the transfer of virtual digital assets (VDA) till March 20. This can be taken as the final figure for the entire 2022-23 fiscal year as it ended on March 31.
1% TDS at $125 Threshold
The budget for 2022-23 brought crypto transactions under a new tax regime in India, which provided for a 1% TDS on VDA transfers exceeding Rs 10,000 (approx. $125) in a financial year. Additionally, all gains on VDA transfers were subjected to a 30% income tax.
From July 1, 2023, the 1% TDS began to be deducted, and as of November 1, the TDS collection on VDAs was Rs 60.46 crore ($7.4 million). Despite the expectations that the government would ease the tax rate to 0.05% and 0.1%, no such relief was provided.
Regulatory Vacuum
Following this, crypto transactions were placed under the Prevention of Money Laundering Act (PMLA) in India, providing some clarity amidst a regulatory vacuum. Due to the high taxes and hostile environment, India’s crypto ecosystem began to lose out to neighboring jurisdictions like UAE and Singapore.
As per a Nasscom study, 60% of India’s 450 Web 3 startups are registered outside of the country, despite having a large talent pool for Web 3 transformation.
Crypto Adoption Growing
India has 150 million crypto users as per the latest Statista data. It is predicted that the country’s crypto adoption rate could surpass that of the UK and the US, with 11% of its population experimenting with digital asset transactions by the end of 2023.
At the G20 Finance Minister and Central Bank Governors meeting hosted in India, discussions on crypto regulations took center stage. By the end of 2023, some regulations are expected to be in place in the powerful economic block for the cryptocurrency sector.
