"Breaking: CoinDCX Report Claims Lower TDS on Crypto Could Improve Compliance, Tax Transparency – Key Findings!"

A report by CoinDCX suggests that reducing Tax Deducted at Source (TDS) on cryptocurrency transactions could enhance compliance and tax transparency.

CoinDCX has released a report aiming to shed light on issues with India's cryptocurrency tax policies, while urging government reforms to enhance compliance and tax transparency in the country. As a Financial Intelligence Unit (FIU)-registered crypto exchange, CoinDCX joins several other firms in advocating for reduced taxes on cryptocurrencies in India, including the one percent Tax Deducted at Source (TDS) on crypto transactions and the 30 percent tax imposed on crypto-related incomes.

Entitled 'Redesigning TDS for Transparency and Compliance', the report by the Indian crypto firm argues that the one percent TDS on all crypto transactions was initially intended as a transparency and compliance measure. However, its implementation does not align with the dynamics of digital asset markets, resulting in losses for industry players and participants.

According to the firm, "A large body of modern economic literature suggests that the marginal tax rate is inversely correlated with reported income and positively correlated with evasion, as observed with the imposition of one percent TDS on VDAs in India."

CoinDCX's latest report on India's crypto tax regime reveals that individuals who have evaded taxes in the past may have done so due to the higher marginal tax rate. The firm also asserts that the imposition of a one percent Tax Deducted at Source (TDS) has resulted in a significant 90 percent drop in trading volumes, leading to reduced income for investors.

This isn't the first instance of crypto firms and related organizations urging the Indian government to lower taxes on crypto transactions. Earlier this year, social media posts advocated for reducing the 30 percent tax on incomes generated from crypto activities and lowering the TDS rate from one percent to 0.01 percent.

Despite these appeals, Finance Minister Nirmala Sitharaman's interim budget announcement for the year did not include any changes to the existing crypto tax regime.

CoinDCX and the Bharat Web3 Association have urged the government to consider revising the crypto Tax Deducted at Source (TDS).

"For revenue collection, a tax rate between 0.01 percent and 0.05 percent should suffice to collect all income tax due from market makers, while allowing them to maintain competitive spreads. Alternatively, a scheme can be introduced that does not involve withholding tax on transactions, such as Annual Information Returns (AIR), which when combined with the Prevention of Money Laundering Act 2002 (PMLA), can ensure sufficient oversight," the firm states in its report.