India has decided to keep its cryptocurrency tax rules unchanged for the 2024/25 fiscal year, despite growing pressure from industry leaders to lower the current rates. Finance Minister Nirmala Sitharaman announced this decision during the budget presentation for the upcoming fiscal year. This announcement follows an interim budget presented by the government five months earlier.
The interim budget presented in February upheld India’s tax deducted at source (TDS) rate for cryptocurrency transactions at 1%, a rule that was enacted by Parliament in April 2022.
Following the introduction of this tax regime, the Indian crypto industry experienced a significant drop in trade volume, raising concerns about its impact on market activity.
Industry representatives have been vocal in their calls for reform. They have proposed reducing the TDS rate from 1% to 0.01% and implementing progressive taxation on gains. Additionally, they emphasize the need to allow the offsetting of losses against gains to create a fairer tax system.
The latest budget presentation confirms that the 1% TDS rate for cryptocurrency transactions will remain unchanged, despite industry appeals for a reduction. Additionally, the flat 30% income tax rate on earnings from crypto assets, which applies to both trading and investments, will continue.
Finance Minister Nirmala Sitharaman has stated that this decision reflects the government’s cautious approach. In September 2023, Nischal Shetty, CEO of India’s largest exchange WazirX, had predicted that the government would likely retain the current tax regime.
Sumit Gupta, founder and CEO of CoinDCX, discussed the tax regime’s impact on India’s crypto industry in an interview with crypto.news last month. He noted that the high tax rates have significantly reduced liquidity and driven investors to seek offshore platforms.
While the latest budget also removed certain taxes for investors, which Gupta welcomed as a positive development for the local crypto industry, he expressed disappointment that the TDS rate was not adjusted. Gupta emphasized the industry’s ongoing push for a more favorable tax framework, including reducing the TDS to 0.01%, allowing the offsetting of losses on virtual digital asset (VDA) transactions, and revising the 30% tax on capital gains.