India’s 2024/25 Budget Keeps Crypto Tax Rules Unchanged

Highlights:

• India’s 2024/25 budget maintains current crypto tax rules despite industry appeals for reduction
• Changes include raising long-term and short-term capital gains taxes, potentially influencing crypto investment
• The government abolished the angel tax, aiming to stimulate growth in India’s startup and Web3 sectors

India’s recent budget announcement confirmed the continuation of existing crypto tax rules, with no changes in spite of significant industry appeals for lower rates. Finance Minister Nirmala Sitharaman maintained the current stance during the fiscal year 2024/25 budget presentation, signaling the government’s cautious approach towards the digital asset market.

India Maintains High Crypto Taxes 🚀https://t.co/lBwM55Obac

India's Finance Minister Nirmala Sitharaman confirms that the controversial crypto tax rules will remain unchanged in the latest budget speech. High taxes continue to concern the crypto community. #India #CryptoTax… pic.twitter.com/T71HsX4fkG

— Crypto Update IO 🚀 (@cryptoupdate_io) July 23, 2024

Crypto Industry Reacts to Unchanged Tax Policies

The primary concern within India’s cryptocurrency sector has been the high tax-deducted-at-source (TDS) policy, currently set at 1%. Industry leaders advocated for a reduction to 0.01%, supported by studies from various think tanks. However, these recommendations were adopted in a different budget. After these taxes were introduced, trading volumes in the market plummeted significantly. This highlighted the adverse effects of the strict tax regime.

The crypto industry suggested a more progressive tax structure, advocating for the ability to offset losses against gains. They also recommended establishing a multi-agency regulatory framework. Despite these suggestions, Dilip Chenoy, Chairperson of the Bharat Web3 Association, remarked on the budget’s lack of changes but noted the industry’s resolve to continue advocating for a more favorable tax structure.

India’s New Budget Impact on Crypto and Tax Changes

The budget also outlined adjustments in other tax areas, raising long-term capital gains tax from 10% to 12.5% and short-term capital gains tax from 15% to 20%. Rajat Mittal, a Supreme Court crypto tax counsel, speculated that these changes might drive investors towards cryptocurrencies. However, crypto gains remain taxed at a flat rate of 30%, and losses cannot be offset against gains like in other securities.

This year’s budget, crafted after Prime Minister Narendra Modi’s re-election and the formation of a coalition government, sets a strategic direction for his term. It maintains the existing crypto tax rates, which are consistent with predictions by industry insiders. Nischal Shetty, CEO of WazirX, had expected the government to keep the existing tax framework.

India Maintains Crypto Taxes Despite Market Pushback

In contrast, the budget offers relief by abolishing the angel tax for all investor classes. This move will boost India’s startup ecosystem, especially in the Web3 sector.

Sumit Gupta, CEO of CoinDCX, mentioned that high tax rates have driven local investors to offshore platforms. However, he welcomed the removal of certain investment taxes as a positive change.

CoinDCX CEO Sumit Gupta said that the company is lobbying India’s government to cut the TDS from 1% to 0.01%. A shift by India to a less onerous crypto tax regime may be two years away.

Indian officials last year imposed a 1% levy — known as TDS — on crypto transactions,…

— Wu Blockchain (@WuBlockchain) September 25, 2023

Overall, the decision to uphold the cryptocurrency tax regime reflects the government’s ongoing caution in dealing with this volatile sector despite clear signals from the market and industry leaders about the need for a more enabling regulatory environment.