Crypto Industry in India Crippled by Tax Laws: $3.852 Billion Moved Overseas

• India’s crypto industry has been crippled under the country’s controversial tax laws in 2022.
• Indian crypto investors have moved over $3.852 billion worth of digital assets from local to international crypto exchanges since February last year.
• An estimated 17 lakh users switched from domestic crypto exchanges to foreign counterparts, due to the 30% tax on income from cryptocurrencies and 1% tax deduction at source on all crypto transaction redemptions.

The Indian cryptocurrency industry is in a state of turmoil, with the government introducing a number of controversial tax laws that have had a drastic impact. According to a report by Esya Centre, a Delhi-based technology policy think tank, Indian crypto investors have moved over $3.852 billion (INR 32,000 crore) worth of digital assets from local to international crypto exchanges since February last year. This phenomenon has been attributed to the 30% tax on income from cryptocurrencies, as well as the 1% tax deduction at source on all crypto transaction redemptions.

The impact of these regulations has been far-reaching, as the report estimates that 17 lakh users have switched from domestic crypto exchanges to foreign counterparts. This is due to the fact that the 1% levy has hurt crypto liquidity in India, forcing high-frequency traders to dramatically reduce their trading in a bid to trim taxes. This has had the unfortunate consequence of domestic exchanges losing 81% of their trading volumes in the four months after the imposit.

The report highlights the need for the government to take steps to make the crypto industry more attractive to investors. It notes that the current tax architecture has crippled the virtual digital asset industry, and that all Indian crypto users will move to foreign exchanges under the current structure. In order to prevent this, the report suggests that the government needs to consider reducing taxation rates, introducing tax holidays, and providing more clarity on the taxation of cryptocurrencies.

Ultimately, it is clear that cryptocurrencies are here to stay, and the government needs to take steps to ensure that the industry is given the opportunity to flourish in India. The industry has already proven itself to be immensely popular in the country, and with the right regulatory framework in place, it could become a major source of income for the Indian economy.