- The Indian government has introduced new crypto tax penalties, including for non-payment of crypto tax at source (TDS).
- India still regulates Crypto income and remains taxed at 30%, while TDS stays at 1%.
- Those who fail to pay source tax on crypto transactions can be sentenced to up to 7 years in prison.
On February 1, 2023, India presented the Union Budget 2023. It included a 30% tax on crypto profits and a 1% tax withheld at source (TDS) on all transactions. Failure to do so can result in a penalty of up to 7 years in prison.
India has kept its restrictive crypto tax rules in place in 2023, i.e., last year. The country imposed complex taxes on crypto transactions: a 30% tax on profits and a 1% withholding tax (TDS) on all cryptocurrency transactions.
Accordingly, the nationwide crypto trading volume has plummeted as approximately $3.852 billion was transferred from India’s domestic crypto exchanges to foreign exchanges between the two countries. February to October 2022, according to a study by the Esya Center, a technology policy think tank in India.
In other words, to dodge tax rules, crypto investors in this country have taken the global exchange route as, unlike Indian crypto exchange platforms, popular international crypto exchanges like Binance and KuCoin do not levy the 1% TDS. However, they do perform know-your-customer (KYC) checks before allowing trading on their platforms.
As such, Finance Minister Nirmala Sitharaman presented the 2023 Union Budget to parliament on Wednesday, emphasizing the need for “a common approach to regulating the crypto ecosystem.”
Cryptocurrency tax company Koinx explained on Twitter that the penalty for failure to withhold or pay crypto source tax includes the amount that the general trusts will levy with the unpaid source tax, noting that for late payments, an annual tax of 15% will apply. And according to India Today, those who fail to pay source tax on crypto transactions can be sentenced to up to 7 years in prison.
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