Ahead of the final announcement of India’s budget for the fiscal year 2024-25, a policy paper outlined reasons why the government should consider revising the country’s crypto tax laws. The report was jointly compiled by the Tax Law Centre, Hyderabad-based NALSAR University of Law and some individual members of the crypto community in India. The report claims that India could bring in Rs. 5,144 crore through capital gains by 2027, only if the country revises its cryptocurrency laws.
Indian Crypto Tax Laws
From 2022, India charges 30 percent tax on all crypto winnings. In addition, it deducts one percent TDS (tax deducted at source) on every crypto transaction. The Ministry of Finance wants to keep track of all crypto transactions, which are otherwise mostly anonymous.
About the 30 percent tax on crypto profits in India, the report says it is the highest in benchmark economies like Ukraine, Canada and the US. Commenting on the TDS law, the report said that no other nation with significant exposure to virtual assets has imposed “such a withholding tax”.
A reduction in this one percent TDS cut could reduce overall TDS returns, increase government revenue through capital gains taxes and improve transaction tracking by Virtual Asset Service Providers (VASPs) operating in India, the document explained. about politics.
“The tax impact is particularly stark given that India does not allow set-off and loss carry-forward, which is uniquely discriminatory, even compared to other industry sectors in India,” the report said.
The impact of these taxes on crypto activities has led to a decline in the number of users involved in crypto exchanges in India. Time and again, exchanges have complained that they have had to take cost-cutting measures to keep their business afloat due to a reduced number of investors signing up to the platform.
The report showed that the number of active users in the Indian crypto space dropped by 81 percent in 2023 alone. Some even switch to foreign exchanges to circumvent these laws.
Where is India in terms of crypto tax regime?
So far, the Indian government has not revealed whether it is even considering revising the crypto tax law. Earlier this year, when Finance Minister Nirmala Sitharaman announced the interim budget ahead of India’s general elections, she skipped mentioning the crypto sector.
So far, the government has not addressed the crypto sector’s request for a tax cut.
