Foreign crypto exchanges offering their service to Indian customers might have to pay additional tax, as per a report in The Economic Times. The Indian Tax authority is exploring the tax bracket that many foreign cryptocurrency exchanges may fall into depending on their service offerings in the country. At present foreign exchanges don’t pay any tax to the Indian authorities.
In absence of any formidable guidelines and regulatory guidelines even Indian exchanges don’t fall into any particular tax bracket that they need to pay. A majority of the cryptocurrency exchanges operating in the country follow the self-regulatory process and pay 18% tax on their profits and margins.
The Economic Times report suggests Indian tax authority is planning to bring services offered by foreign exchanges under online information database access and retrieval (OIDAR) services. OIDAR rules require any entity offering data or digital service to Indians to pay a certain tax depending on the tax bracket they fall in.
Use of Foreign Exchanges in India on the Rise
In absence of any regulatory guidelines for crypto businesses and the growing refusal of Indian banks to offer crypto services have forced a significant section of the crypto community to turn towards foreign exchanges like Binance.
Indian banks claim the absence of regulatory clearance from the government as the key reason behind their non-cooperation. The Indian Central Bank RBI has also maintained a passive stance on crypto calling it a volatile and speculative asset.
The RBI banking ban imposed in 2018 and later quashed by the Supreme court in 2020 had little to no impact on Indian banks. They refused to process crypto transactions and often cited the quashed circular from 2018 to warn customers. The Indian crypto community has their hopes hinged on the crypto bill believed to get tabled during the upcoming Monsoon parliamentary session.