Shift to Offshore Crypto Exchanges
The imposition of a one percent tax-deducted-at-source (TDS) on the trading of cryptocurrencies in India has resulted in a significant shift of millions of users to offshore crypto exchanges, as revealed by a recent report published by the Esya Centre.
In February 2022, India’s Ministry of Finance introduced the one percent TDS on crypto transactions with the aim of reducing speculative activity and increasing transparency within the crypto ecosystem. However, the report shows that this tax policy has not achieved its intended goals.
“The Esya Centre’s report has revealed that implementation of 1% tax resulted in the loss of potential revenues of approximately $420 million (Rs. 3,493 crores) compared to the collected revenue of just $30 million (Rs. 258 crores).” – The Esya Centre
Many crypto users have migrated to offshore exchanges, resulting in a missed opportunity for India’s digital economy. The report highlights that the collected revenue from the 1% TDS on crypto transactions was mostly contributed by domestic Indian crypto exchanges, while trades by Indians on offshore platforms accounted for a mere fraction of what could have been collected.
