India’s Stringent Crypto Tax Rules Remain Unchanged, New Budget Reveals
Following her re-appointment as India's Finance Minister, Nirmala Sitharaman has revealed the nation's budget for 2024-2025. This comes after the Minister's interim budget on February 1, before the April/June 2024 elections.
The Indian cryptocurrency industry expected a relaxation of the country's hawkish crypto tax law as the new administration takes shape. However, during her budget presentation on Tuesday, the minister revealed that the crypto tax rules remain unchanged.
Crypto Taxation in India Remains Unchanged Despite Industry PleasThe Indian government introduced its crypto taxation policy in the 2022 Union Budget. This tax rule imposed a 30% tax on gains from all cryptocurrency transactions and 1% TDS (tax deduction at source).
Market participants and key industry players considered taxation significantly higher than taxes on traditional asset classes. They voiced concerns about potentially stifling innovation and hindering the growth of emerging technologies like crypto in India.
India's crypto industry proposed reducing the controversial tax deduction policy, adding a think tank study as evidence to support its demands.
The industry also requested that the government implement progressive taxes on crypto gains instead of the 30% flat rate. They also recommended allowing investor losses to offset gains and reducing the 1% TDS to 0.01%.
Moreover, industry players proposed a multi-agency regulatory framework instead of India's single-regulator legislation.However, the recent budget has ended all hope for a more relaxed taxation for crypto businesses.
Dilip Chenoy, Chairperson of the Bharat Web3 Association, expressed disappointment in the latest development.
In his statement: We were hoping for some relaxation to the taxation framework on Virtual Digital Assets in this budget..."
However, according to Chenoy, the unchanged policy is unsurprising, given the government's hostile stance towards cryptocurrency.
...but the absence of any announcement is not particularly disheartening, given the govt.'s overall negative stance towards the sector," Chenoy explained.
In addition to the 30% flat rate tax on gains, the Indian governmentraised taxes on long-term capital gains from 10% to 12.5% and on short-term capital gains from 15% to 20%. While this increment is substantial, how it will impact cryptocurrency trading remains unclear.
India's Crypto Regulatory Outlook
#Breaking Capital gains taxation changes
1Long-term hiked from 10% to 12.5%
2Short term hiked from 15% to 20%
3No new update on Virtual Digital Assets as of now #Budget2024 #Crypto- CoinDCX: India's Safest Crypto Platform (@CoinDCX) July 23, 2024
Over the years, India has witnessed a gradual yet positive shift in its crypto regulator stance. While the taxation policy appears hawkish, it has clarified how crypto exchanges and related entities should report their earnings.
Also, crypto exchanges in India are now entities subject to the country's Prevention of Money Laundering Act.
However, the high taxes and other stringent rules have negatively impacted the crypto ecosystem's growth. This has forced prominent businesses to migrate to more friendly jurisdictions.
For example, in March 2022, OKX shut down its operation in India, citing local regulations. In December 2023, the government suspended Binance from operating in India for not complying with anti-money laundering regulations.
Moreover, Binance has cited tax deductions and other regulatory challenges as reasons for not re-entering the Indian market.
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