2024-06-22 02:07:05
Ahead of India’s final budget announcement for FY2024-2025, a policy paper has outlined the reasons why the government should consider revising the crypto tax laws in the country. The report has collectively been compiled by the Centre for Tax Laws, Hyderabad-based NALSAR University of Law, and some individual members of the crypto community in India. The report claimed that India could fetch Rs. 5,144 crores through capital gains by 2027, only if country revises its crypto laws.
India’s crypto tax laws
Since 2022, India has been levying 30 percent tax on all crypto gains. In addition, it deducts one percent TDS (tax deducted at source) on every crypto transaction. The Finance Ministry wishes to maintain a trail of all crypto transactions, that are otherwise largely anonymous.
About the 30 percent tax on crypto profits in India, the report said that it was the highest across comparative economies like Ukraine, Canada, and the US. Commenting on the TDS law, the report noted that no other nation with significant exposure to virtual assets imposed “such withholding tax”.
A reduction in this one percent TDS cut could decrease overall TDS refunds, increase government revenue through capital gains taxes, and improve transaction monitoring by the virtual asset service providers (VASPs) that are operating in India, the policy paper explained.
“The tax impact is particularly harsh considering that India does not allow set off and carry forward of losses, which is uniquely discriminatory, even when compared to other industry sectors in India,” the report noted.
The impact of these taxes on crypto activities has led to a drop in the number of users engaging with crypto exchanges in India. Time and again, exchanges have complained that they have had to take cost cutting measures to keep their businesses afloat because of reduced number of investors signing up on the platform.
The report has shown that the number of active users in India’s crypto space dropped by 81 percent in 2023 alone. Several are even moving to foreign exchanges to go around these laws.
Where does India stand on crypto tax regime?
As of now, the Indian government has not disclosed if it is even considering revising the crypto tax laws. Earlier this year, when Finance Minister Nirmala Sitharaman announced the interim budget before India conducted its general elections, she skipped mentioning the crypto sector.
The government has thus far not addressed the crypto sector’s demand to reduce the taxes.
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