India Unlikely to See Crypto Tax Reduction in Tuesday’s Budget

Experts predict that India will not change its controversial tax-deducted-at-source （TDS） policy on crypto transactions in the upcoming budget. This article examines the implications for the crypto industry and the demands for regulatory reforms.

Points

• India is unlikely to reduce the TDS on crypto transactions in the upcoming budget.
• The Bharat Web3 Association （BWA） has requested a reduction from 1% to 0.01%.
• The current high TDS rate leads to capital flight to international exchanges.
• Other demands include progressive taxes on gains and multi-agency regulation.

No Expected Change in TDS Policy

India is unlikely to alter its controversial 1% tax-deducted-at-source （TDS） policy on crypto transactions when Finance Minister Nirmala Sitharaman presents the full budget for 2024-2025 on Tuesday. This budget comes after Prime Minister Narendra Modi’s Bharatiya Janata Party （BJP） failed to secure a majority, forming a coalition government with alliance partners demanding over $15 billion in funding.

Industry Demands and Challenges

The Bharat Web3 Association （BWA） has been advocating for a reduction in TDS from 1% to 0.01%, arguing that the high rate drives capital flight to international exchanges and decentralized exchanges （DEXs）. The BWA has presented data supporting the reduction, claiming it would retain more transactions onshore and increase government revenue. Other demands include establishing progressive taxes on crypto gains instead of the flat 30% rate and allowing losses to offset gains. They also seek multi-agency regulation for better oversight.

Government’s Stance

Despite these demands, experts like Punit Agarwal, founder of crypto taxation platform KoinX, do not foresee a reduction in the near term. High TDS is viewed as necessary to prevent capital flight, despite its adverse impact on the domestic crypto market. Rajat Mittal, a Supreme Court crypto tax counsel, noted that robust oversight is prioritized over industry concerns, suggesting a rate reduction is unlikely.

Hope for Future Reforms

Despite the government’s current stance, the

Bharat Web3 Association （BWA） remains hopeful for future reforms. The association was invited for talks with the Finance Ministry during pre-budget consultations, unlike in 2023 before February’s interim budget. This invitation indicates that the government is willing to engage with the crypto industry, though no commitments were made during the discussions.

Conclusion

India is unlikely to see a reduction in the TDS on crypto transactions in the upcoming budget, despite industry demands and the potential benefits of such a change. The high TDS rate continues to drive capital to international exchanges, posing challenges for the domestic crypto market. However, the engagement between the government and the BWA suggests that there is room for future dialogue and potential reforms. Investors and stakeholders should stay informed about these developments and continue to advocate for a more favorable regulatory environment.