Several crypto investors in India have failed to pay 30 percent tax on profits they made via crypto activities in the last two years, possibly due to regulatory unclarity and lack of customer awareness, crypto tax firm Taxnodes has warned, urging the community to pay their crypto taxes on time. In conversation with Gadgets360, the Singapore-headquartered firm has pointed out that crypto tax compliance in India continues to remain ‘very low’ since these taxes were first levied back in 2022.
Avinash Shekhar, the CEO of Taxnodes, says that there exists a misconception that the government lacks ways to trace crypto transactions — leading opportunists to believe that they can pull off tax evasions.
Shekhar has urged Indian crypto traders and investors to ensure that they are complying with the tax laws while compiling their filings this year. Chiming in with several market players on this notion, the Taxnodes CEO said it would do the Web3 industry good if the Indian community gains the government’s trust with discipline and compliance.
“To foster the mainstream adoption of crypto assets as a viable investment option, it’s imperative for startups, consumers, and governmental bodies to collaborate synergistically and adhere to government guidelines. This collaborative effort may entail the government to implement effective, yet relaxed regulations,” Shekhar said.
In 2022, India’s finance ministry brought the digital assets sector under its tax regime. Under existing laws, all crypto incomes in India are taxed by 30 percent. In order to keep a track of these otherwise largely anonymous crypto transactions, Indian government also levies a one percent TDS on each crypto transaction.
Despite several requests from Web3 firms for revision and reduction in these tax percentages, the finance ministry is yet to announce any changes in policy.
Between 2022 and 2023, merely 0.07 percent crypto holders in India paid their crypto taxes, a report by Sweden-based tech research firm Divly had claimed last year. Shekhar also noted that the primary reason for low tax compliance in India stems from a lack of awareness among taxpayers.
Until April 2023, the controversial one percent TDS on each crypto transaction reportedly fetched the government over $19 million (roughly Rs. 157 crore).
In February this year, CBDT Chairperson Nitin Gupta had disclosed that around Rs. 180 crore was collected through the TDS levied on crypto transactions, during the 2023-24 fiscal.
Shekhar, accessing the situation, has noted that the primary reason for low tax compliance in India stems from a lack of awareness among taxpayers.