In 2022 India instituted a 30% tax on profits and a 1% tax deducted at source (TDS) on all transactions for the crypto sectorBut this may not be all bad for the crypto ecosystem as it might incentivize retailers to return to local exchanges.”Until now there was no penalty for non-deduction. Budget 2023 has now established that,” said Ashish Singhal, a co-founder of Indian crypto investing app CoinSwitch Kuber.”This is to say, don’t try to avoid TDS by using offshore or non-compliant platforms. You may be penalized as per Section 271C of the Income Tax Act. If you are investing in crypto, use a tax-compliant platform,” he said.Alternatively, the penalty written into the law in 2023, could disincentivize crypto traders more after the rules in 2022. Back then the industry had predicted the year would lead to a “period of pain.”This proved to be ostensibly true, even if there were other contributing macro economic factors. Crypto trading volumes plummeted almost immediately and interest in crypto nosedived.Several individuals closely working in the crypto regulatory space had publicly said they were hopeful for a tax cut but privately opined that it was unlikely, CoinDesk reported earlier this week.The primary demand from the industry and recommendation from policy think tanks was to reduce the TDS to 0.01%, or at minimum to 0.1%.No changes to existing crypto taxes has left “Indian crypto companies on the stairway to heaven,” said Rajagopal Menon, Vice President of Indian crypto exchange WazirX. “We hope that the government will reconsider its position on crypto taxes.”Sumit Gupta, the co-founder of CoinDCX, another Indian exchange, said this was “not good for our country and those building in this sector in India” but that he was still “committed to partnering with the government to devise policies that are conducive to the sustainable growth of the ecosystem.”India has kept a crypto bill in cold storage since early last year saying crypto regulation cannot succeed without global coordination – something its prioritized with its agenda setting power of holding the G-20 presidency.The Finance Ministry did not immediately return a request for comment.
This article was originally published by Coindesk.