The ITD announced that crypto asset transactions conducted through foreign exchanges, private wallets, and decentralized finance (DeFi) applications hinder the calculation of taxable income.
ITD representatives acknowledged that the anonymity of cryptocurrencies and the ability to instantly transfer funds abroad, bypassing regulated financial intermediaries, make it difficult to track suspicious transactions.
A large number of digital asset transactions are conducted on foreign exchanges or decentralized platforms not registered with Indian regulators, the Department stated. Given that transactions involve multiple jurisdictions, identifying crypto asset owners is virtually impossible, despite the efforts of tax authorities in various countries to exchange information, tax officials are dissatisfied.
Currently, India imposes high taxes on crypto traders. Traders pay a flat 30% tax on all profits from digital assets, as well as a 1% tax deducted at source (TDS) – this applies to all transactions, regardless of profitability.
Despite high taxes, major crypto exchanges are eager to enter the Indian market. In December, the US-based Coinbase resumed registering Indian users after a two-year hiatus. Earlier, the Kraken exchange also expressed its willingness to obtain a license and return to India.