Description: This paper is an updated analysis of the impact of the 1% tax deducted at source (TDS) on trading in crypto assets (referred to as VDAs – virtual digital assets – in the Indian Income Tax Act 1961) introduced in India in 2022. The 1% TDS levy seems intended to discourage speculative activity and increase traceability in the VDA ecosystem. Our empirical analysis suggests these goals remain unmet. In particular, the 1% TDS has led Indian users to trade on offshore VDA exchange platforms and other untraceable channels. This, in turn, results in lost revenue for the exchequer and lost opportunities in the form of foregone positive externalities for the digital economy in India.
Attribution: Dr. Vikash Gautam. Impact Assessment of Tax Deducted at Source on the Indian Virtual Digital Asset Market. Special Issue No. 210, November 2023, Esya Centre.