Indian crypto tax rules for the 2024/25 budget will remain unchanged despite increasing pressure from industry leaders to reduce the rates. Finance Minister Nirmala Sitharaman announced this during the budget presentation for the 2024/25 fiscal year. The announcement comes five months after an interim budget was presented, which also upheld the existing tax framework.
The interim budget, presented in February, maintained India’s tax deducted at source (TDS) rate for cryptocurrency transactions at 1%, a rule passed by parliament in April 2022. This tax regime led to a significant crash in trade volume within the Indian crypto industry, raising concerns about the negative impact on market activity. Industry representatives have actively called for changes to the tax framework, including lowering the TDS rate from 1% to 0.01% and introducing progressive taxation on gains. They also stress the necessity of permitting the offsetting of losses against gains to establish a more equitable tax system.
Indian Crypto Tax: Industry’s Plea Ignored
Despite these appeals, the latest budget presentation indicates that the 1% rate will remain unchanged. Additionally, the flat income tax rate of 30% on earnings from crypto assets, outlined in the interim budget, will still be enforced. This tax policy applies to both crypto trading and investments, further stressing the government’s cautious stance on cryptocurrency regulation.
Sumit Gupta, founder and CEO of CoinDCX, expressed his concerns in an interview with crypto.news, stating that the high tax rate has significantly reduced liquidity and driven investors to offshore platforms. He noted,
“For investors, we had anticipated some relaxation to the taxation framework in this budget. We will continue to push for rationalization of the taxation framework which includes reducing the TDS to 0.01%, allowing setoff of losses on VDA transactions and modifying the 30% tax on capital gains.”
Indian Crypto Tax: A Sector in Crisis
The Indian crypto industry has struggled under the weight of these tax regulations. Since the introduction of the 1% TDS rate, there has been a noticeable crash in trade volume. The industry’s calls for tax reforms have grown louder, but the Finance Minister’s latest budget suggests no immediate relief.
Nischal Shetty, CEO of WazirX, India’s largest exchange, projected in September 2023 that the government would likely maintain the current tax regime. His prediction has proven accurate, much to the dismay of crypto industry leaders who had hoped for a more supportive tax framework.
The Finance Minister’s insistence on a cautious approach is seen by many as a hindrance to the growth of India’s burgeoning crypto sector. Despite the pressure from industry leaders, the government’s stance remains unchanged, reflecting a wariness of the volatile nature of cryptocurrencies.
In an interview last month with crypto.news, Sumit Gupta highlighted the detrimental impact of the Indian crypto tax regime. He stated,
“The high tax rate has significantly diminished liquidity and led investors to shift to offshore platforms.”
Gupta’s remarks underscore the broader sentiment within the industry, which feels stifled by the current tax policies.
Despite these challenges, there has been a small victory for investors. The latest budget presentation removed certain taxes for investors, a move that Gupta believes will bolster the local crypto industry. He noted that this abolition is a positive step, even if the retention of the TDS rate remains a significant concern.
The Indian crypto tax policy has created a difficult environment for the local crypto industry, which continues to grow despite these hurdles. Over 1,000 startups are now part of this sector, demonstrating resilience and innovation. However, the industry’s growth potential is hampered by stringent tax regulations that many believe need urgent reform.
The retention of the 1% TDS rate, combined with the 30% income tax on crypto earnings, continues to be a point of contention. Industry leaders argue that a reduction in the TDS rate to 0.01% would stimulate trade volume and liquidity, making the market more attractive to investors.
As the Indian crypto industry looks to the future, the call for a more equitable tax system remains loud and clear. The government’s decision to maintain the current tax regime has been met with disappointment, but industry leaders like Sumit Gupta remain committed to advocating for change.
Indian crypto tax policies have once again made headlines, with TurkishNY Radio reporting on the Finance Minister’s latest budget announcement. Despite significant industry pressure, the government’s decision to maintain the 1% TDS rate and the 30% income tax on crypto earnings underscores a cautious approach to cryptocurrency regulation. As the debate continues, the Indian crypto industry remains resilient, pushing for a more balanced and supportive tax framework.
