Indian Finance Minister Nirmala Sitharaman’s 2024 budget presentation left the crypto community disappointed as it failed to address their plea for reduced tax rates.
Points
- The Indian crypto industry requested a reduction in the 1% tax deducted at source （TDS） to 0.01%.
- Finance Minister Nirmala Sitharaman’s budget presentation did not mention cryptocurrencies.
- The existing stringent tax regime on crypto transactions remains unchanged.
- The Indian crypto market has seen a significant decline in trading volumes and active users due to high taxes.
- Despite the challenges, India remains a global leader in cryptocurrency adoption.
The Indian crypto community was left disappointed after Finance Minister Nirmala Sitharaman’s 2024 Union Budget speech failed to address their calls for tax relief. Industry advocates had pushed for a reduction in the current 1% tax deducted at source （TDS） to 0.01%, arguing that the high tax rate has stifled the growth and performance of the local crypto market.
However, Sitharaman’s budget presentation on July 23 made no mention of cryptocurrencies, leaving the existing tax regime unchanged. This decision means that the government does not yet recognize crypto as a serious business sector in India, according to Sathvik Vishwanath, CEO of the local exchange Unocoin.
Introduced in the 2022 Budget, India’s crypto tax regime is one of the strictest in the world, with a 30% flat tax on crypto profits and a 1% TDS on all transactions. These measures have been blamed for a drastic reduction in trading volumes on Indian exchanges, which have plummeted by 97% since the taxes were implemented. Active user numbers have also dropped by 81%, according to a report by the National Academy of Legal Studies and Research （NASLAR）.
Despite the significant decline in market activity, the Indian government has not shown any signs of revising the tax rates. The NASLAR report highlighted that the national treasury is losing approximately 59 billion Indian rupees （$700 million） in tax revenue due to diminished activity on local exchanges. It suggested that reducing the TDS to 0.01% could potentially double tax revenues by reviving trading volumes.
While the crypto industry’s plea for tax relief was ignored, Sitharaman did propose a TDS reduction from 1% to 0.01% for e-commerce operators. This decision further underscores the government’s cautious stance towards cryptocurrencies, comparing them to gambling and betting activities.
India’s central bank, the Reserve Bank of India （RBI）, has historically taken a negative stance
towards cryptocurrencies. In 2018, the RBI banned financial institutions from servicing the crypto industry, a ban that was later overturned by the Supreme Court in 2020. Despite the legal victory for crypto advocates, the RBI’s stance remains largely unchanged, as evidenced by its May 2024 bulletin, which warned of the speculative nature of crypto assets.
Cointelegraph
The Indian crypto community continues to hope for a more favorable regulatory environment. Sathvik Vishwanath expressed optimism that India might eventually adopt more supportive measures if developed countries continue to promote crypto and introduce favorable policies.
Despite the harsh tax regime, India remains a global leader in cryptocurrency adoption. The country topped blockchain analytics firm Chainalysis’ 2023 Global Crypto Adoption Index, highlighting the strong interest and engagement in digital assets among Indian users.
解説
- Impact of High Tax Rates: The stringent tax regime on cryptocurrencies in India has led to a significant decline in trading volumes and active users on local exchanges. Reducing the tax rates could potentially revive the market by attracting more traders and increasing transaction volumes.
- Government’s Stance on Crypto: The Indian government’s decision to maintain the current tax regime reflects its cautious approach towards cryptocurrencies. By equating crypto activities with gambling and betting, the government signals a lack of confidence in the sector’s legitimacy.
- Future Prospects: Despite the challenges, the Indian crypto market shows resilience. Continued advocacy from industry leaders and comparisons with more developed markets may eventually lead to a more favorable regulatory environment. The global trend towards crypto adoption could influence India’s policies in the long run.
The Indian crypto community must navigate the current regulatory landscape while continuing to advocate for more supportive measures. As global adoption of cryptocurrencies grows, there is hope that India will adjust its policies to foster a more conducive environment for digital assets.