The Indian crypto community is facing a serious issue because of the hefty taxes. For them, trading digital assets is extremely difficult due to these levies. The industry is being prevented from expanding by these levies, which is even worse. It’s as though their aspirations have a large obstacle in the way. Not happy about it is CoinDCX, one of the biggest cryptocurrency exchanges. From their perspective, the cryptocurrency trading business is negatively impacted by these exorbitant levies. This market’s potential is being destroyed by the Indian government’s stringent tax laws pertaining to cryptocurrency transactions.
The Tax Structure
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You must report any capital gains on your cryptocurrency and NFTs, also known as digital assets, if you own them as investments. But, the money you gain is regarded as business revenue if you’re holding them for trading reasons. Your virtual digital assets, such as cryptocurrencies and NFTs, will be subject to a 1% TDS (tax deducted at source) fee if you sell them. This implies that taxes will be deducted from your earnings on a modest basis. You will not be able to deduct any loss from your digital assets from taxes on any other income you may have. The costs of the infrastructure required to mine cryptocurrency assets will not be included in the acquisition cost.
The Impact
About 16 months ago, India decided to impose a 1% TDS tax on cryptocurrency transactions. This tax has had a negative effect on cryptocurrency trading in the nation. The primary objective of this tax regulation was to monitor the purchase and sale of cryptocurrency assets, rather than generating more revenue for the nation. The latest market study about cryptocurrency trading in India does not appear to be promising. The data indicates a significant decline in trade activity. And here’s the kicker: 95% of traders use foreign platforms that are extremely difficult for local authorities to monitor. Summit Gupta, the CEO of CoinDCX, disclosed this information. In an interview, Gupta even expressed his belief that the government will ultimately have to reduce the tax since they are beginning to recognise the issue.
The Counter Measure
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India seeks international cooperation to create cryptocurrency regulations. They are looking for assistance from large international organizations. After the elections in India in 2024, Gupta believes that regulations pertaining to cryptocurrencies would be more apparent by the end of 2025. However, the Indian Ministry of Finance has not yet made any announcements on cryptocurrency taxes. The new tax regulations caused significant financial losses for CoinDCX, a cryptocurrency trading firm. In order to enforce the regulations that prevent individuals from utilizing cryptocurrencies for illicit purposes, they were forced to incur additional costs.
Conclusion
People are still discovering uses for cryptocurrencies even after India imposed taxes on local exchange currency. They are utilizing financial services based on blockchain technology and offshore trade, for example. The goals of CoinDCX’s proposed tax reform are to balance the needs of the government’s income stream with the long-term viability of the cryptocurrency industry. The regulatory landscape surrounding cryptocurrencies is rapidly evolving, thus it is critical that those in charge establish regulations that foster sector growth. India can rise to prominence in the global cryptocurrency industry if they take such action. Both the economy as a whole and those who invest in cryptocurrencies would benefit from this.
