CRYPTO INDIA

The aftermath of an unexpected election outcome and the recent $230 million hack of WazirX have cast doubt on any potential reduction in India’s crypto tax, experts say.

No Change Expected in Crypto Tax Policy

Finance Minister Nirmala Sitharaman’s forthcoming budget for 2024-2025, scheduled to be unveiled on Tuesday, is unlikely to revise the controversial tax-deducted-at-source (TDS) policy on crypto transactions, according to industry analysts. This budget marks the first under Prime Minister Narendra Modi’s third consecutive term, with Modi’s Bharatiya Janata Party (BJP) now needing to navigate a coalition government.

The TDS Debate

The Bharat Web3 Association (BWA) has long advocated for reducing the TDS rate from its current 1% to 0.01%. Despite presenting compelling data supporting their case — including studies showing potential revenue benefits from retaining transactions domestically — industry voices like Punit Agarwal from KoinX express skepticism about an immediate rate reduction.

“I don’t foresee the 1% TDS being reduced in the near term, despite its necessity,” remarked Agarwal. “The current rate risks pushing transactions offshore, resulting in capital flight and revenue loss for the government.”

Industry Demands and Regulatory Expectations

Apart from TDS reduction, the industry has called for progressive taxes on gains, allowance for loss offsets, and a framework for multi-agency regulation. However, recent political developments and the prominence of stringent regulatory priorities post-WazirX hack may overshadow these demands in the upcoming budget.

Hope Amidst Uncertainty

Despite these challenges, the BWA remains optimistic, especially after being invited to pre-budget consultations — a step not taken before the previous interim budget in February 2023. However, R Venkat from BWA noted the lack of clarity from ministry officials during these discussions.

“While high TDS rates may have driven retail investors to international exchanges, the government’s focus on robust regulation suggests a prioritization of oversight over tax adjustments,” observed Rajat Mittal, a Supreme Court crypto tax counsel.

Looking Ahead

As India lacks comprehensive crypto regulations, the forthcoming budget’s approach to regulatory frameworks could provide critical insights. While hopes for tax relief may be tempered, stakeholders anticipate clarity on regulatory directives to guide the industry’s trajectory.