Regulation
India unlikely to see crypto tax cut in Tuesday’s budget
Experts said India is unlikely to change its controversial withholding tax (TDS) policy on cryptocurrency transactions when Finance Minister Nirmala Sitharaman presents her full budget for 2024-25 on Tuesday.
The budget is the first since Prime Minister Narendra Modi was elected to a third consecutive term. What is different this time is that Modi’s Bharatiya Janata Party (BJP) has unexpectedly failed to secure a majoritywhich needs to form a coalition government. The budget will likely take into account its alliance partners, who have already asked for more than 15 billion dollars in the next few years.
For the cryptocurrency industry, TDS is a hot button issue. The Bharat Web3 Association (BWA) has been calling for the tax to be reduced from 0.01% to 1% since it was announced two years ago. The industry body presented data from multiple sources, including a think tank study that provided evidence to support a reductionAmong other arguments, he says lowering the rate will keep more transactions onshore, leading to more revenue for the government.
“I don’t see the 1% TDS being cut anytime soon, despite the need,” said Punit Agarwal, founder of cryptocurrency taxation platform KoinX. “The current rate leads to capital flight to global exchanges and DEXs, ultimately causing a loss for the government.”
Although the surprising election result introduced the need to satisfy coalition partners and Last week’s $230 million cyber attack of cryptocurrency exchange WazirX, which may have pushed cryptocurrencies down the priority list, BWA officials said they hope at least one of their three requests will be granted.
The BWA is also seeking “direction in terms of regulation.” India does not have comprehensive cryptocurrency regulation, although senior officials at the Ministry of Finance have said they plan to introduce a draft bill to parliament.
What gives them hope is that the association has been invited to speak to the ministry as part of the pre-budget consultations, unlike in 2022 and 2023. However, ministry officials “did not give us any sense or comment,” said R Venkat, a member of the Bharat Web3 Association who attended the meeting. The finance ministry declined to comment.
“The high TDS may have pushed retail investors to offshore exchanges, but the government’s focus on stringent regulation suggests that a reduction in fees is unlikely,” said Rajat Mittal, a crypto tax advisor to the Supreme Court. “The need for robust oversight in the digital asset space is seen as more critical than easing industry concerns.”