Indians Move $3.8B To Foreign Exchanges Since Crypto Tax Rules, Study Shows
Since the crypto law which imposes taxes on cryptocurrency transactions in India, it appears that investors are deserting their local exchanges in search of non-taxed ones.
Impact Of Crypto Taxation On The Country
A research study conducted by Esya Centre, a New Delhi-based think tank focused on technology policy, found that Indian investors have moved more than $3.8 billion in cumulative trading volume from local to international crypto exchanges since the government announced new crypto tax rules on February 1, 2022.
A total of $3.852 billion (INR 32,000 crore) was transferred from local to international crypto exchanges in India between February and October 2022.
This report is significant as it offers the first estimate of the financial impact of India’s crypto tax policy on domestic exchanges.
The policy, which was announced by Prime Minister Narendra Modi’s government on February 1, 2022, imposes a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions.
According to the Esya Centre report, domestic exchanges in India lost 81% of their trading volumes within four months of the implementation of the 1% TDS rule, which took effect on July 1, 2022.
This came despite earlier predictions from the industry that the rule, along with the 30% tax on crypto profits that became effective on April 1, 2022, would “kill liquidity.”
Will This Kill Crypto In India?
Nischal Shetty, CEO and founder of WazirX, one of India’s largest exchanges, stated that in anticipation of the 30% tax on crypto profits that was set to take effect in India, people would look for ways to avoid the domestic system and continue participating in cryptocurrency, as they would not want to leave the market.
The report from Esya Centre found that following the implementation of the tax, an estimated 17 lakh users switched from domestic to foreign crypto exchanges.
Several recent studies have shown that the implementation of India’s crypto tax policy led to a significant decrease in cryptocurrency activity in the country.
However, this new report predicts that if the current situation persists, centralised exchange businesses in India may become stunted.
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