A total of $3.8 billion in cumulative trading volume was shifted by Indians from local to foreign exchanges following the country's announcement of stiff crypto taxes, according to a esyacentre study. By amitoj
found that domestic exchanges lost 81% of their trading volumes in four months after the imposition of the much debated 1% TDS rule.
Days before the 30% tax came into effect, Nischal Shetty, CEO and founder of WazirX, one of India's biggest exchanges, said what people will do now"is find ways to not be part of the [domestic] system because people are not going to leave crypto." The Esya Centre report found that"an estimated 17 lakh users switched" from domestic crypto exchanges to foreign counterparts.
"We anticipate a commensurately large negative impact on tax revenues, as well as a decrease in transaction traceability – which defeats the two central goals of the extant policy architecture," the report said."The current tax architecture may lead to a loss of approximately $1.2 trillion of local exchange trade volume in the next four years," it added.
The report said India's Virtual Digital Asset industry is"crippled under the current tax architecture" and that the"baseline scenario" under the current structure is that"almost all" Indian centralised VDA users will move to foreign exchanges. As an alternative to the current tax regime, the researchers recommend TDS should be changed from 1% per transaction to 0.1% which would be at par with the securities transaction tax, and allowing the setoff of losses. The study also recommended progressive taxes on gains instead of the flat 30% tax.of $36.4 billion, India requires money to flow in as opposed to outflows to offshore exchanges bypassing banking channels.
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