High crypto taxes in India remain unchanged, use of offshore to avoid TDS prohibited

High crypto taxes in India remain unchanged, use of offshore to avoid TDS prohibited

Months of lobbying by Indian and global crypto firms to see if local tax laws provided some leeway proved futile. India's finance minister did not mention crypto or virtual assets at all in her budget speech for the financial year 2023-24.

No relief from existing crypto taxes has been granted.

Crypto taxes unchanged

The Indian crypto sector's hopes of tax relief from the budget for the next financial year, unveiled yesterday, have been dashed. According to media reports, the government has not provided any relief on the existing 1% TDS and 30% on crypto profits.

The offsetting of losses against profits in various crypto trades has also not been changed. In fact, Finance Minister Nirmala Sitharaman did not mention the term crypto or virtual digital assets even once in her Budget speech.

Indian crypto exchanges, whose trading volumes plummeted after the introduction of crypto taxes in the last budget, had demanded that the 1% TDS be reduced to more reasonable limits of 0.01% to 0.1%.

Avoidance of TDS Punishable

The government has announced penalty provisions for non-payment of TDS by using non-compliant or offshore platforms. The penalty would be equal to the amount of TDS evaded. It can also result in a prison sentence of up to six months. Late payment of TDS will be penalized with 15% interest per annum, crypto tax advisory platform KoinX said in an explainer on Twitter.

A recent report claimed that in the nine months since crypto taxes were introduced, over $3.8 billion in trading volume has moved abroad from crypto platforms from India.

"The TDS of 1% for crypto transactions remains unchanged. But there is a clarification. The responsibility for deducting TDS lay with crypto exchanges or the user (if using P2P or other means), but so far there was no penalty for non-deduction." said Ashish Singhal, co-founder and CEO of CoinSwitch Kuber.

Indian stock exchanges can benefit from this

The penalty for non-payment of TDS by using non-compliant or offshore platforms is likely to help Indian platforms that profess to adhere to local laws and tax obligations.

"...do not try to evade TDS by using offshore platforms or non-compliant platforms. You may be penalized under Section 271C of the #IncomeTax Act. If investing in crypto, use a tax compliant platform," Singhal said on Twitter.

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