The leading crypto exchange in the market, KuCoin, has unveiled a new policy change affecting its Indian users. From 10th April 2024, the platform will put a 1% Tax Deducted at Source (TDS) on the transfers of Virtual Digital Assets (VDAs) in accordance with the Indian Government’s guidelines.
This move follows soon after KuCoin hit the news for achieving compliance with FIU-IND (the Financial Intelligence Unit-India), marking another milestone in its commitment to abide by the rules and regulations of the financial sector in all parts of the world.
The imposition of TDS on the platform will affect many trading activities without any exemption from buying INR/ crypto. Concretely, these transaction types, that is, selling in the INR/Crypto markets, trading within the crypto/crypto markets, and transactions in the P2P market, will include 1% TDS. The immediate effect of this measure is that this tax will not cover purchases made in the INR/Crypto market.
For KuCoin, the TDS deduction will apply to all users who have passed their Know Your Customer (KYC) process using Indian verification. The standard deduction rate has been fixed at 1%, but the circumstances listed in section 206AB of the Income Tax Act may lead to an additional deduction of 5%. This is applicable for taxpayers who have not filed income tax returns for two consecutive years but have TDS deductions exceeding ₹50,000 annually during this period.
The exchange makes it possible for users to watch the TDS extracted from their closed orders, and it even offers the option of getting a trade report with detailed information regarding tax deductions supplied, thus ensuring transparency.
This development comes after the Indian government, in July 2022, imposed a 30% tax on cryptocurrency profits, introducing a heavy tax burden on crypto transactions. The 1% TDS is likely to worsen the liquidity problems currently experienced by the digital asset platforms and users in India, negatively affecting transaction fluidity and execution prices.
After the implementation of the new tax policy by KuCoin, the cryptocurrency market in India might gradually switch to other platforms like Bybit, Pionex, and Gate.io, which in turn might get increased attention from traders and investors.
Consequently, KuCoin is a neighboring legal issue in America. A legal process was recently started by the Commodity Futures Trading Commission (CFTC) against the exchange. The lawsuit claims that KuCoin performed unregistered transactions with futures, swaps, and retail leveraged commodity transactions connected to digital coins, representing the difficulties of regulation in cryptocurrency exchanges in their international market.