India’s crypto tax rules remain unchanged despite industry pressure

India has retained its cryptocurrency tax rules for the 2024/25 budget despite growing calls from industry leaders for a reduction in the current rates.

Indian Finance Minister Nirmala Sitharaman announced this in her budget presentation for the fiscal year 2024/25. Notably, the latest budget presentation came five months after the government presented the interim budget.

This interim budget, presented in February, kept India’s tax deducted at source (TDS) rate on cryptocurrency transactions at 1%, a rule that was passed by the parliament in April 2022.

As a result, the Indian crypto industry witnessed a major collapse in trading volume soon after the tax regime was introduced. This negative impact on market activities has raised concerns about regulation.

Industry representatives have been actively calling for changes in the tax framework. Their suggestions include reducing the TDS rate from 1% to 0.01% and introducing graduated taxation on profits. They also stress the need to allow set-off of losses against profits to create a fairer tax system.

However, the latest budget presentation suggests that the 1% rate will remain unchanged despite these objections. In addition, the flat 30% income tax rate on crypto-asset gains outlined in the interim budget will still apply. This tax policy applies to both crypto trading and investments.

Despite industry pressure, the finance minister claims the decision reflects the government’s cautious approach. In September 2023, Nischal Shetty, CEO of India’s largest exchange WazirX, predicted that the government is likely to continue with the current tax regime.

Last month, CoinDCX founder and CEO Sumit Gupta highlighted the impact of the tax regime on India’s domestic crypto industry in an interview with crypto.news, stating that the high tax rate has significantly reduced liquidity and prompted investors to shift to offshore platforms.

The latest rollout also removed taxes for investors, Gupta told crypto.news that CoinDCX welcomes the removal.

He noted that this move would boost the ever-growing local crypto industry, which currently encompasses over 1,000 startups. However, the retention of the TDS rate was not a welcome development. Gupta said:

“For investors, we had envisaged some relaxation in the taxation framework in this budget. We will continue to push for rationalisation of the taxation framework, which includes reducing TDS to 0.01%, allowing set-off of losses on VDA transactions and amending the 30% tax on capital gains.”