CoinDCX has released a report that attempts to highlight issues with India's crypto tax policies, while also seeking government reforms to improve tax compliance and transparency in the country. The FIU-registered crypto exchange is the latest of many companies that have tried to appeal to the government to reduce taxes on cryptocurrencies in the country, including the one percent tax deducted at source (TDS) for on cryptographic transactions and 30 percent tax levied. on income generated by crypto activities.
In its report titled 'Redesigning TDS for Transparency and Compliance', the Indian crypto firm states that the TDS of one percent of all crypto transactions was initially envisioned as a transparency and compliance tool, but its application is not aligned with the nature of digital asset markets. spelling losses for industry players and participants.
“A large body of modern economic literature suggests that the marginal tax rate is inversely correlated with reported income and positively correlated with evasion, as seen with the imposition of one percent TDS on VDAs in India” , the company said in the report.
According to CoinDCX's latest report, a study on India's crypto tax regime revealed that people who have evaded taxes in the past may have done so because of the higher marginal tax rate. The firm also claims that one percent TDS has led to a 90 percent drop in trading volumes, 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 sought to reduce the 30 percent tax levied on income generated from crypto activities and reduce 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 there will be any new changes related to taxes on crypto activities in the coming months.
CoinDCX and the Bharat Web3 Association have urged the government to consider a review of crypto TDS.
“For revenue collection, a tax rate of between 0.01% and 0.05% should be sufficient to collect all income taxes owed to market makers, while allowing market makers market to maintain competitive differentials Alternatively, a scheme that does not provide for withholding tax on transactions, such as annual information returns (AIR), which in combination with the Prevention of Money Laundering Act 2002 (PMLA ) can ensure sufficient oversight,” the company says 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 received.
