Crypto tax in India remains at 30% despite industry calls for reduction
India continues to retain its controversial crypto tax regime. Cryptocurrencies were left out of the annual budget announcement for the 2024-25 session.
Indian Finance Minister Nirmala Sitharaman, in her speech on July 23, decided to keep the crypto tax rules unchanged.
As such, crypto investors in India are subject to a 1% tax-deducted-at-source (TDS) on every crypto transaction. Meanwhile, profits generated from cryptocurrency trading or transfer of assets are taxed at 30%.
Further, the stringent rules do not allow crypto losses to be set off against any other income, such as salary or business income, nor be carried forward to subsequent years. In addition, only the cost of acquisition is deductible.
Commenting on the matter, Sumit Gupta, CEO of crypto exchange CoinDCX, said the crypto community will continue to advocate for tax reductions, adding:
We have submitted data-backed quantitative analyses on the flight of capital and users overseas, and the potential increase in government revenue should the taxation structure be revised. We are hopeful that the government will consider our requests and that we will see changes in the future. However, he added that the abolition of the Angel tax for all classes of investors in the current budget would help bolster the Indian startup ecosystem.
Industry calls for reduced taxation ignored
Industry experts had previously speculated that a reduction in crypto tax was unlikely. According to Rajat Mittal, a Supreme Court crypto tax counsel, the government is more focused on “the need for robust oversight” rather than addressing industry concerts.
However, Mittal did acknowledge that the high taxation was driving off retail investors to “offshore exchanges.”
A similar sentiment was echoed by Balaji Srihari, Business Head of crypto exchange CoinSwitch.
In an interview with Invezz, Srihari said that the existing tax rules remained a “matter of friction” for retail investors. He also admitted that investors were migrating to foreign platforms but said this was expected:
We believe that the government’s approach to crypto taxation is part of a broader effort to protect investors and ensure the stability of the financial system. Given the history of the crypto ecosystem, such cautious policy measures are understandable.
In December 2023, India’s Financial Intelligence Unit (FIU) announced plans to block the URLs of nine foreign cryptocurrency exchanges for “operating illegally” and failing to comply with the Prevention of Money Laundering Act.
This comprised big names like Binance and Kraken, which held a lion’s share of the Indian crypto market. But that didn’t help much with the dwindling trading volumes, according to Rajagopal Menon, vice president at another Indian exchange, WazirX. He told Invezz:
The government did too little too late by shadow banning some of them by taking them off app stores. But if you already had an app on the phone, taking it off the app store didn’t make a difference to your life as one could still trade.
Meanwhile, the cryptocurrency industry has been urging the government to reduce the 1% TDS to 0.01%. Some proposals have also urged the regulators to re-think the 30% capital gains tax and also allow offsetting of losses.
Last year, an Indian think tank published a report suggesting that more than $3.8 billion in trading volume had moved from local to foreign crypto exchanges. The mass exodus happened after the controversial tax was introduced back in February 2022.
The report urged the government to lower the TDS, urging that offshore platforms were reaping the benefits of India’s crypto economy.
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