On February 1, the entire Indian crypto sector pinned its eyes on the Parliament as the country’s Finance Minister presented the annual budget for 2023-2024. However, the budget left the industry in despair as it kept its restrictive crypto tax rules unchanged.
In fact, Nirmala Sitharaman, the country’s finance minister, did not mention cryptocurrencies, virtual digital assets, blockchain, or central bank digital currencies (CBDCs) in her speech accompanying the budget. The government has brought some significant changes to its income tax regime, but unfortunately, crypto doesn’t seem to have any part in it.
Last year, India placed a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all crypto transactions. This brought some major harm to the industry, and their predictions that the year would be a “period of pain” eventually came true.
Sources reveal that the primary motive for introducing a TDS on all crypto transactions was to determine the total number of citizens actively using cryptocurrencies. The relevant data will be available to the government later this year when the citizens file their income tax returns (ITR) starting this May.
Within ten days of the new tax policy, the trading volume on exchanges across India dropped by 70% and almost 90% in the following three months. The rigid tax policy not only forced crypto traders to move offshore exchanges but also forced them to execute their budding projects to move outside India.
Figures revealed that Indians moved more than $3.8 billion in trading volume from local to international crypto exchanges within nine months after the announcement.
Several individuals working in the crypto regulatory domain had publicly said they were hoping for pay cuts, but somewhere they knew it was highly unlikely.
A few weeks ago, The Indian Crypto Association, consisting of renowned crypto enthusiasts, had requested and recommended the industry reduce the TDS to 0.01%, or at minimum to 0.1%.
Rajagopal Menon, vice president of an Indian crypto firm, says that with no changes to existing taxes, the “Indian crypto companies are on the stairway to heaven.”
India has kept its crypto bill on a halt since last year, saying that crypto regulation requires global coordination to succeed. It has also prioritized this with its agenda-setting power of golding the G-20 presidency. Sources also see this as one of the factors for crypto not making it to the sheets of this year’s annual budget and hope for amendments in due course or during the next budget.