India maintains high crypto tax rate despite industry pressure

India has decided to maintain its existing crypto tax regulations for the 2024/25 fiscal year despite ongoing appeals from industry leaders for a reduction in current rates.

Finance Minister Nirmala Sitharaman confirmed this decision during the budget presentation on Tuesday for the financial year 2024/25.

India’s latest budget maintains 1% Crypto TDS

India’s latest budget presentation comes five months after the interim budget maintained the tax deducted at source (TDS) rate of 1% for crypto transactions, a norm set in April 2022.

This regulation led to a significant decrease in trading volume in the Indian crypto industry. It then prompted industry representatives to advocate for a reduction in the TDS rate to 0.01% and the introduction of a progressive tax on earnings. They also called for the ability to offset losses against earnings for a more equitable tax system.

Despite these calls, the recent budget presentation indicates that there is no change in the 1% TDS rate or the flat 30% income tax on crypto income. In addition, the long-term capital gains tax increased from 10% to 12.5% ​​and the short-term capital gains tax from 15% to 20%.

While the impact of these changes on crypto trading is still uncertain, the removal of the angel tax for all investors is considered a positive development. This move is likely to attract more Web3 startups and grow India’s startup ecosystem.

The Indian crypto sector is facing strict current policies

It is worth noting that Sitharaman was expected to maintain the current crypto tax rates, given the government’s numerous warnings about the risks associated with crypto trading.

The Reserve Bank of India (RBI) has historically opposed cryptocurrencies. It banned financial institutions from servicing the crypto industry in 2018, a decision overturned by the Supreme Court in 2020.

RBI’s May 2024 bulletin also reiterated the speculative nature of crypto assets and criticized decentralized finance (DeFi) for being driven by speculation rather than genuine economic transactions.

Despite strict tax policies, the Indian crypto industry remains optimistic about future tax cuts, depending on international developments such as cryptocurrency promotion or legalization in other countries.

India’s strict tax regime has not hindered its global leadership in crypto adoption, as evidenced by its top spot in Chainalysis’ Global Crypto Adoption Index 2023. Local industry continues to push for tax reforms, hoping for a more favorable regulatory environment in the future.

Meanwhile, recent election results and the $234.9 million hack of crypto exchange WazirX may have pushed cryptocurrency regulation lower on the government’s priority list.

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