India’s current cryptocurrency tax structure “may lead to a loss of approximately US$1.2 trillion of local exchange trade volume in the next four years,” according to research by Esya Centre, a technology policy think tank in India.

See related article: The last 12 months the year to forget, says India’s WazirX crypto exchange  

Fast facts

  • Cumulative trade volume of about US$3.852 billion moved from India’s centralized crypto exchanges to foreign exchanges between February and October 2022, after India introduced strict crypto tax rules on Feb. 1, the report said.  
  • India imposed a 30% flat tax on all crypto income effective April 1 and introduced a 1% tax deducted at source (TDS) on transactions above 10,000 Indian rupees (US$120) from July 1. India grants no provision to offset crypto losses against gains made elsewhere. 
  • The implementation of the 1% TDS has had the most “distortionary impact” out of the three tax measures since Indian exchanges lost up to 81% of their trading volumes in July-October following the levy, the report said. 
  • Virtual Digital Assets adoption by Indians – measured in terms of mobile app downloads – fell by 16% month-on-month for domestic exchanges during July-September, but increased by the same quantum for foreign exchanges, the report said.
  • Indian crypto exchanges lost 97.1% of their volumes in January-October while foreign exchanges lost 36.3%. 
  • The report also recommended lowering the TDS from 1% to 0.1%, allowing gains to offset losses, as well as ensuring internationally competitive tax on gains. 
  • See related article: Ban crypto or brace for the next financial crisis, RBI governor warns