CoinDCX has released a report that attempts to highlight issues with India’s crypto tax policy, while demanding reforms from the government to improve compliance and tax transparency in the country. The FIU-registered crypto exchange is the latest of many companies to try to appeal to the government to reduce taxes on cryptocurrencies in the country — including a one percent tax deducted at source (TDS) on crypto transactions and a 30 percent tax on income generated from crypto activities .
In its report titled ‘Redesigning TDS for Transparency and Compliance’, the Indian crypto firm claims that the one percent TDS on all crypto transactions was originally intended as a transparency and compliance tool, but its implementation is out of sync with the nature of the digital asset market, spelling losses for players and industry participants.
“A large body of modern economic literature suggests that the marginal tax rate is inversely proportional to reported income and positively correlated with evasion, as observed with the imposition of one percent TDS on VDAs in India,” the firm said in a report.
According to CoinDCX’s latest report, a study of India’s crypto-tax regime has revealed that individuals who have evaded taxes in the past may have done so because of the higher marginal tax rate. The company also claims that the one percent TDS has led to a 90 percent drop in trading volume, which would lead to a drop in income for investors.
This is not the first time that crypto companies and related organizations have asked the government to reduce taxes on crypto transactions in India. Earlier this year, social media posts called for a 30 percent tax cut on income generated from crypto activities and a reduction in the TDS rate from one percent to 0.01 percent.
These requests were made before Finance Minister Nirmala Sitharaman announced the interim budget for this year, which did not introduce any changes to the crypto tax regime.
The final budget will be announced after the ongoing general election, but it is currently unclear whether any new changes related to taxes on crypto activities will arrive in the coming months.
CoinDCX and Bharat Web3 Association have urged the government to consider revising crypto TDS.
“For revenue collection, a tax rate of between 0.01 percent and 0.05 percent should be sufficient to collect all income taxes owed from market makers while allowing market makers to maintain competitive margins. Alternatively, a scheme that does not provide for withholding tax on transactions such as Annual Information Returns (AIR) can be introduced, which combined with the Prevention of Money Laundering Act, 2002 (PMLA) can provide sufficient oversight,” the company said in its report.
Gadgets360 has reached out to the finance ministry for comment on the report, and this article will be updated with a response when it is received.
