Indians moved more than $3.8 billion in crypto to foreign exchanges because of the harsh tax regime
Money from the crypto sector in India is flowing out since the country imposed a draconian tax regime on crypto trading in the country.
Indian investors move $3.8 billion in crypto to foreign exchanges because of the harsh tax regime
According to a study from the Esya Center, crypto users in India have transferred more than $3.8 billion in trading cryptocurrencies from domestic crypto exchanges to international exchanges between February and October 2022.
Indian crypto traders may have lost interest and are gradually giving up on the game because they are subject to income tax obligations of up to 30% and 1% tax on crypto transactions (TDS). Since the tax came into effect in July 2022, there have been 429,000 downloads of Binance as of September, three times more than CoinDCX. At the same time, domestic exchanges lost 81% of trading volume after four months of controversial tax legislation.
When the tax policy came into effect, Nischal Shetty – CEO of WazirX, who once described 1% TDS as the worst-case scenario for the industry, said Indians would “find a way out” of the system within the country and then “massively migrate” to the outside.
The Esya report also said that the current tax structure could lead to a loss of about $1.2 trillion in domestic trading volume if the government keeps the tax regime in place for the next four years.
In addition, the Esya researchers recommend that authorities change the TDS from 1% per transaction to 0.1%, equivalent to a securities transaction tax. They also recommend allowing losses to cover gains and setting up a progressive tax on gains instead of a flat 30% tax.
As a country where imports exceed exports at an all-time high of $36.4 billion, India needs cash inflows instead of outflows as it is now. The latest findings could pressure the authorities to stem the flow of money abroad through cryptocurrencies, which has increased India’s current value deficit.
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