Indian tax authorities collected Rs 158 crore (roughly $19 million) in TDS on transfer of virtual digital assets (VDA) until March 20, Minister of State for Finance Pankaj Chaudhary told Parliament on Tuesday.
Since the fiscal year ended on March 31, it can be taken as the final figure for the entire fiscal year 2022-23.
1% TDS at $125 Threshold
The Indian government introduced crypto transactions under a new tax regime through the 2022-23 budget. It provided 1% TDS on VDA transfers exceeding Rs 10,000 (approximately $125) in a financial year. In addition, all profits from VDA transfers were subject to 30% income tax.
1% of TDS started to be deducted from 1 July 2023. In November, the minister informed the Indian Parliament that the collection of TDS on VDAs from 1 July to 1 November was Rs 60.46 crore. (7.4 million dollars). Given the low tax collection, the government was expected to relax the tax rate to between 0.05% and 0.1%, in line with industry demand. But the authorities provided no such relief.
regulatory vacuum
Subsequently, the crypto transactions were placed under the Prevention of Money Laundering Act (PMLA). Surprisingly, industry representatives hailed the decision as providing some sort of clarity, a break from a complete regulatory vacuum.
Due to high taxes, coupled with a hostile regulatory environment, India, which had a flourishing crypto ecosystem, began to cede the upper hand to neighboring, friendlier jurisdictions such as the United Arab Emirates and Singapore.
According to a Nasscom study, 60% of India’s 450 Web 3 startups are registered outside the country. The report also highlighted that India is well poised to drive the transformation of Web 3 thanks to its large talent pool, which accounts for 11% of the global market.
Cryptocurrency adoption grows
According to the latest data from Statista, India has 150 million cryptocurrency users. By the end of 2023, India’s cryptocurrency adoption rate could be higher than the UK and US, with 11% of locals experimenting with digital asset transactions.
India hosted the G20 Finance Minister and Central Bank Governors meeting last month, where discussion of cryptocurrency regulations featured prominently. And it looks like by the end of 2023, the powerful economic bloc will have some kind of regulation for the cryptocurrency sector.
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