Indian tax authorities collected Rs 158 crore (approx. $19 million) in TDS on the transfer of virtual digital assets (VDA) till March 20, Minister of State for Finance Pankaj Chaudhary told the Parliament on Tuesday.
Given that the financial year ended on March 31, it can be taken as the final figure for the entire 2022-23 fiscal.
1% TDS at $125 Threshold
The Indian government brought crypto transactions under a new tax regime through the budget for 2022-23. It provided for 1% TDS on VDA transfers exceeding Rs 10,000 (approx. $125) in a financial year. Besides, all gains on VDA transfers were subjected to a 30% income tax.
The 1% TDS began to be deducted from July 1, 2023. In November, the minister informed the Indian Parliament that TDS collection on VDAs from July 1 to November 1 was Rs 60.46 crore ($7.4 million). Given the low tax collection, it was expected that the government would ease the tax rate and bring it between 0.05% and 0.1%, in line with the industry’s demand. But the authorities did not provide any such relief.
Subsequently, crypto transactions were placed under the Prevention of Money Laundering Act (PMLA). Industry representatives surprisingly hailed the decision as it provided some kind of clarity, a break from a complete regulatory vacuum.
Due to the high taxes, along with a hostile regulatory environment, India, which had a burgeoning crypto ecosystem, began to cede the advantage to the neighboring and more friendly jurisdictions such as UAE and Singapore.
As per a Nasscom study, 60% of India’s 450 Web 3 startups are registered outside the country. The report also highlighted that India is well set to drive the Web 3 transformation thanks to its large talent pool, which accounts for 11% of the global market.
Crypto Adoption Growing
As per the latest Statista data, India has 150 million crypto users. By the end of 2023, India’s crypto adoption rate could become higher than that of the UK and the US, and 11% of locals will have experimented with digital asset transactions.
India hosted G20 Finance Minister and Central Bank Governors meeting last month, where discussion on crypto regulations figured prominently. And it seems by the end of 2023, the powerful economic block will have some kind of regulation in place for the cryptocurrency sector.