India has maintained its cryptocurrency tax rules for the 2024/25 budget, despite increasing calls from industry leaders for a reduction in the current rates.
India’s Finance Minister Nirmala Sitharaman disclosed this during the budget presentation for the 2024/25 fiscal year. Notably, the latest budget presentation comes five months after the government presented an interim budget.
This interim budget, presented in February, maintained India’s tax deducted at source (TDS) rate for cryptocurrency transactions at 1%, a rule passed by the parliament in April 2022.
Consequently, the Indian crypto industry witnessed a massive crash in trade volume shortly after the tax regime was introduced. This negative impact on market activity raised concerns about the regulations.
Industry representatives have actively called for changes to the tax framework. Their proposals include lowering the TDS rate from 1% to 0.01% and introducing progressive taxation on gains. Additionally, they stress the necessity of permitting the offsetting of losses against gains to establish a more equitable tax system.
However, the latest budget presentation indicates that the 1% rate will remain unchanged despite these appeals. In addition, 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.
Despite industry pressure, the Finance Minister insists the decision reflects the government’s cautious approach. In September 2023, Nischal Shetty, CEO of India’s largest exchange WazirX, projected that the government is likely to maintain the current tax regime.
Last month, Sumit Gupta, the founder and CEO of CoinDCX, highlighted the impact of the tax regime on India’s local crypto industry in an interview with crypto.news. He pointed out that the high tax rate has significantly diminished liquidity and led investors to shift to offshore platforms.
The latest presentation also removed taxes for investors. Gupta told crypto.news that CoinDCX welcomes this abolition.
He remarked that this move would bolster the local crypto industry, which has shown continued growth, now encompassing over 1,000 startups. However, the retention of the TDS rate was not a welcome development. Gupta said:
“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.”
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