Indian crypto users look overseas to trade after UPI ban
Updated
Numerous crypto investors from India have invested in digital assets outside the country, and that allows them to carry on trading in bitcoin or dogecoin regardless of regulatory uncertainty and high domestic taxes.
Nagaraj says that in hindsight, he is glad that his cryptocurrency investments are all in the US. Hurdles to trade in India, such as the recent ban on using a state-run mobile payments system, Unified Payments Interface (UPI), will not bother the Bengaluru-based software programmer.
“My cousin, who is in Germany pursuing a master’s degree, holds ethereum there. All it requires is a simple bank account. You need not be there,” Nagaraj told Capital.com.
Ethereum to US dollar (ETH/USD)
Others, routing savings into peer-to-peer money through Indian exchanges, say they are not planning to liquidate their holdings.
“The UPI ban doesn’t affect me because I use my debit card to make deposits,” said Abhishek Bhonsle, a 36-year-old creative director at an advertising agency. He holds cardano.
His bank has never flagged his transactions, at least, not until now.
“I haven’t sold anything since 1 April (when the new rule mandating investors to pay a 30% tax on crypto on profits converted into Indian rupees took effect).
“If I do sell, I’ll keep it in crypto because the market is bad right now. I’d rather see it grow. I could move my holdings to my brother’s wallet elsewhere, hold on to it for five or six years and sell,” Bhonsle added.
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Exchanges are moving offshore
Moving house to a more business-friendly location is fast emerging as ‘the’ strategy to navigate obstacles to crypto trade in the South Asian nation.
Indian exchange WazirX’s co-founders Nischal Shetty and Siddharth Menon have reportedly relocated to Dubai. Responding to this week’s news about their move, the digital exchange told users on Twitter.
“We are a remote-first organisation with employees from over 70+ locations. This gives all the company employees the option to work from anywhere, subject to their comfort and convenience unless they are required to travel officially. WazirX is headquartered in Mumbai, and there is no change in any of our operating procedures. It is business as usual.”
India’s 30% tax on crypto profits
Up until April, most Indian crypto investors were self-reporting crypto-related income in their tax filings with the government.
That has changed with the introduction of sections 115BBH (a tax on income from virtual digital assets) and 194S (which governs the payment on transfer of a virtual digital asset) to the country’s tax rules.
In a February post on its official blog, WazirX put out a concise interpretation of the new regime:
Section 115BBH: From the Indian financial year (FY) 2022-23, any income earned (sale consideration (minus) cost of acquisition) from the transfer of virtual digital assets like Crypto and NFT will be taxed at 30% flat.
Section 194S: From 1 July 2022, any person (purchaser) responsible for paying any sum as consideration (in cash or kind) for the transfer of a virtual digital asset will have to deduct (a) 1% tax and deposit this tax amount with the government (subject to conditions).
Section 56: In addition to the above, virtual digital assets received as gifts will have to be disclosed and offered for tax (by the receiver of the gift) under the head ‘Income from other sources’.
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