• The Bharat Web3 Association (BWA) has urged the Indian finance ministry to reduce the TDS on VDA transfers and to review the flat tax rate on crypto profit.
  • Since the introduction of the 1% TDS and 30% tax, VDA trading volumes on Indian exchanges have plummeted by 97%, with active users decreasing by 81%.

Recently, a body representing the crypto and Web3 industry, Bharat Web3 Association (BWA), has asked the Union finance ministry to reduce the Tax Deducted at Source (TDS) on Virtual Digital Assets (VDA) transfers from the current 1% to 0.01 percent. BWA has also requested a review of the 30% flat tax rate on income from VDA transfers.

“The stringent taxation framework and lack of regulation have led to a flight of capital, causing a significant revenue loss for Indian VDAs and the government in recent years. This has compelled Web3 startups and entrepreneurs to relocate to more VDA-friendly jurisdictions,” said Dilip Chenoy, Chairman of Bharat Web3 Association.

In February 2022, India changed its tax policy and imposed a hefty 30% tax flat on crypto profits irrespective of one’s income tax slab. Not to mention, the government also imposed a 1% TDS on transferring VDAs. The new rules also did not allow for setting off or carrying forward losses. 

The goal was to track VDA transactions, discourage speculative trading, and ensure steady tax revenue. However, recent reports show that these goals have not been achieved, leading to calls for urgent reform.

The introduction of the 1% TDS caused a sharp drop in trading volumes and active users on Indian VDA exchanges. A report found that between February 2022 and January 2024, VDA trading volumes fell by 97%, and active users decreased by 81%. 

And this decline is mainly due to traders moving to offshore exchanges, which undermines the goal of tracking VDA transactions and results in significant revenue loss for the Indian government.

The newly elected Indian government, led by Prime Minister Narendra Modi, will present the Union Budget on July 23. India’s crypto industry is hopeful, expecting some tax relief and clear guidelines from the government.

Edited by Harshajit Sarmah