Crypto India Looks For Relief But Holds Out Little Hope In Budget Speech
India is unlikely to change its restrictive crypto tax rules when Finance Minister Nirmala Sitharaman unveils the country’s new budget on Wednesday, CoinDesk has learned.
The nation’s budget indicates how government resources are allocated and the latest tax rules. Last year, this included stiff taxes on crypto transactions: a 30% tax on profits and a 1% tax deducted at source (TDS) on all transactions for the crypto sector, despite uproar from the industry.
Crypto trading volumes plummeted almost immediately, Indians moved more than $3.8 billion in trading volume from local to international crypto exchanges in the nine months after the announcement and interest in crypto nosedived.
The primary demand from the industry and recommendation from policy think tanks is to reduce the TDS to 0.01%, or at minimum to 0.1%.
R. Venkatesh, the head of public policy at CoinSwitch Kuber, said there is a “mismatch between the intent and the actual impact of the TDS with 1% of the capital locked up at every sell transaction.”
The tax is pushing crypto users offshore, undermining the stated government objective of tracing transactions.
Other suggestions include establishing progressive taxes on gains instead of the flat 30% tax, allowing losses to offset gains, and carrying out economic analysis to understand the optimal taxation structure.
The Bharat Web 3 Association, a policy body representing the Indian crypto industry, shared these demands with the government during a presentation.
Tax cut unlikely
Several individuals closely working in the crypto regulatory space have publicly said they are hopeful for a tax cut but privately opined that it is unlikely.
Rajat Mittal, a crypto tax counsel in India's Supreme Court, said he didn’t expect a tax cut but hoped for it so that investors “are not forced to move assets abroad and tax leakage can be stopped.”
Policy experts like Subhash Garg, a former secretary in the Finance Ministry’s Department of Economic Affairs and Meghna Bal, a fellow at the Esya Centre said that while reasons for a tax cut exist, the nation has other priorities.
Indian Prime Minister Narendra Modi has stated that crypto regulation cannot succeed without global coordination. This view was echoed by Sitharaman when India assumed the G20 presidency, where she said determining how to regulate crypto will be one of India’s priorities.
“How can India propose changes or new rules when it has publicly stated the need for global coordination that it’s discussing at ongoing G-20 meetings which will only end in September,” said a source familiar with India’s G-20 work.
India has kept a crypto bill in cold storage since early last year.
It’s unclear whether India will mention its ongoing work around its central bank digital currency (CBDC), the retail version of which it expects to roll out fully by December.
Read More: India Has Clamped Down on Crypto. What Will It Do With Its G-20 Power?