Regulation
Cryptocurrency tax rules in India remain unchanged despite industry pressure
India has retained its cryptocurrency tax rules for the 2024-25 budget, despite growing calls from industry leaders to reduce the current rates.
Indian Finance Minister Nirmala Sitharaman disclosed this during the presentation of the budget for the 2024/25 fiscal year. Notably, the latest budget presentation comes five months after the government presented a provisional budget.
This interim budget, presented in February, kept India’s withholding tax (TDS) rate on cryptocurrency transactions at 1%, a rule past by parliament in April 2022.
As a result, the Indian cryptocurrency industry witnessed a massive collapse in trading volume immediately after the introduction of the tax regime. This negative impact on market activity has raised concerns about regulations.
Industry representatives have been actively calling for changes to the tax framework. proposals include lowering the TDS rate from 1% to 0.01% and introducing a progressive taxation on earnings. They also stress the need to allow set-off of losses against earnings to establish a fairer tax system.
However, the latest budget presentation indicates that the 1% rate will remain unchanged despite these calls. In addition, the flat 30% income tax rate on cryptocurrency earnings outlined in the interim budget will still apply. This tax policy applies to both cryptocurrency trading and investments.
Despite industry pressure, the finance minister insists that 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, founder and CEO of CoinDCX, highlighted the impact of the tax regime on the local cryptocurrency industry in India in an interview with crypto.news. He pointed out that the high tax rate has significantly reduced liquidity and led investors to move to offshore platforms.
The latest filing also removed fees for investors. Gupta told crypto.news that CoinDCX welcomes this abolition.
He noted that this move would boost the local cryptocurrency industry, which has shown continuous growth, now comprising over 1,000 startups. However, the retention of the TDS rate was not a welcome development. Gupta said:
“For investors, we had envisaged some easing of the tax framework in this budget. We will continue to push for rationalisation of the tax framework which includes reducing TDS to 0.01%, allowing set-off of losses on VDA transactions and amending the 30% capital gains tax.”