India's Central Directorate of Direct Taxes (CDDT) has collected over INR 100 crore ($12 million) from one percent source deduction tax (IDT) on cryptocurrency transactions this fiscal year. The Indian government has introduced a one percent direct tax rate on all cryptocurrency transactions from July 1, 2022. In an interview with ANI, the chairman of the tax authority said that they have collected over INR 700 crore ($84 million) in at-source tax in the current financial year from online gaming companies and cryptocurrency transactions. More than $12 million has been collected from cryptocurrency taxes. However, this NIV amount does not include tax on income received by the government from the transfer of cryptocurrency, which is 30 percent.
Tax introduced after "phenomenal increase" in cryptocurrency transactions
While the rules for regulating cryptocurrency in India are still unclear, the central government has imposed heavy taxes to curb the uncontrolled adoption of cryptocurrency in the world's most populous country. In her Budget speech for 2022-23, Indian Finance Minister Nirmala Sitharaman announced the introduction of one percent NIV on cryptocurrency transactions. She cited the “phenomenal increase” in cryptocurrency transactions as a reason for establishing a special tax regime. At the same time, she proposed taxing income from the transfer of any virtual digital asset at 30 percent. India's central government significantly changed its stance on cryptocurrency regulation last year. The government has moved from calling for a complete ban on cryptocurrency to supporting a global framework to regulate this new industry.
India Witnesses Massive Cryptocurrency Adoption Despite High Taxes
India ranked first in the Chinalysis Global Crypto Adoption Index. The Global Cryptocurrency Adoption Index ranked more than 150 countries across multiple metrics to measure organic cryptocurrency adoption, with the Asian country ranking first. Earlier in an interview with CryptoNews, the chief public policy officer at Indian crypto exchange CoinDCX, Kiran Mysore Vivekananda, said that the government's goal of introducing NIV has failed, given the massive increase in cryptocurrency adoption in the country. He argued that the purpose of introducing the NIV was to dissuade people from investing in cryptocurrency, which did not work.