On February 1st 2022, the government of India announced that it would impose a tax of 30% on income from cryptocurrencies from the new financial year 2022-23 (April 1, 2022 to March 31, 2023) and a 1% TDS on all crypto transactions starting July 1st, 2022. The move in a way quelled the uncertainty surrounding the fate of cryptocurrencies in India, and suggested that it may not be banned as feared earlier. But, by then, cryptocurrencies had already entered the bear market territory. The crash was worsened by the recent collapse of algorithmic stable coin TerraUSD and the Indian crypto tax only worsened the already plummeting market. The Ramifications of the Ill-Planned Indian Crypto Tax Twenty-two months ago, Bitcoin was trading at its highest level, but after falling 70% from its record highs in November, the cryptocurrency is now trading at its lowest level in 18 months. The crypto market is notoriously volatile and is down from a peak of $2.9 trillion, Overall the crypto market capitalization has fallen to $914 billion. Globally, crypto exchanges are trimming their costs and laying off hundreds of employees as trading volumes take a major hit. While the government of India disregarded the demand to lower the TDS rate to between 0.01%-0.05%, the Central Board of Direct Taxes came out with long-awaited clarifications over the applicability of tax deducted at the source. Section 194S was inserted in the Income Tax Act through F...
