India does not appear to be making any changes to the controversial tax deducted at source (TDS) policy affecting the crypto-assets (virtual currency) industry.
Finance Minister Nirmala Sitharaman presented the Budget in Parliament on February 1. Expectations were low that the harsh taxes on crypto trading (30% tax on profits and 1% TDS on all trades) would change. However, there was a glimmer of hope as the efforts of India’s domestic crypto industry and a study by a think tank strongly recommended lowering the TDS.
Expectations from the financial sector were low for this budget as India is due for a general election in two months. Finance Minister Sitharaman announced that there will be no changes to the tax system, whether direct or indirect.
In election years, the Treasury typically does not release a full budget, but releases an interim budget to cover short-term expenses. The budget will be announced in July after the election results are known. Prime Minister Narendra Modi and his Bharatiya Janata Party are expected to come to power, according to opinion polls.
India’s crypto industry has been asking the government to reduce the 1% tax rate to 0.01% since the TDS was first announced two years ago. Indian crypto exchanges are in survival mode as they try to cope with the 1% TDS.
Dilip Chenoy, chairman of the Bharat Web3 Association, a policy organization that advocates for India’s Web3 sector, said while he doesn’t expect any major moves, the current budget is an interim one. “I really hope that changes will be announced after the election,” he said.
“High TDS and income tax rates are barriers that keep both creators and consumers away from India,” he said. “These have a significant impact on the prospects for Web3 in India. We have highlighted these concerns to key stakeholders and will continue to do so.”
According to a study by Esya Centre, as many as 5 million crypto traders have moved their trading overseas due to the tax imposed by the Indian government, and have lost $420 million (approximately 60.9 billion yen) since its introduction in July 2022. The company is facing potential losses of as much as 1 dollar = 145 yen).
“Given that India is at a pivotal juncture in the crypto revolution, we are excited about the Prime Minister’s commitment to digital public infrastructure and innovation,” said Rajagopal Menon, vice president of cryptocurrency exchange WazirX. Aspiration would benefit from integrating provisions for long-term financing of domestic crypto-asset projects.” “We hope that these moves, along with the previous demand to reduce the TDS tax rate to 0.01% and eliminate losses for traders, will be included in the government’s agenda.”
The government did not reduce TDS tax rates in the past two years, but last month took action against offshore crypto exchanges, resulting in crypto trading returning to Indian exchanges.
｜Translation: CoinDesk JAPAN
｜Edited by: Toshihiko Inoue
｜Original text: India Keeps Stiff Taxes on Crypto as Interim-Budget Is Revealed in Election Year