Ahead of the final announcement of India's budget for the fiscal year 2024-2025, a policy paper has outlined reasons why the government should consider overhauling the country's crypto tax laws. The report has been compiled collectively by the Tax Law Centre, Hyderabad-based NALSAR University of Law and some individual members of the Indian crypto community. The report claimed that India could achieve Rs. 5,144 crore through capital gains by 2027, only if the country revises its crypto laws.
Crypto Tax Laws of India
Since 2022, India has been charging a 30 percent tax on all crypto earnings. It also deducts one percent TDS (tax deducted at source) on every crypto transaction. The Ministry of Finance wants to keep track of all crypto transactions, which are otherwise largely anonymous.
At around 30 percent tax on crypto profits in India, the report said it was the highest in comparative economies such as Ukraine, Canada and the US. Commenting on the TDS law, the report noted that no other nation with significant exposure to virtual assets imposed “such a withholding tax.”
A reduction in this one percent TDS cut could decrease overall TDS refunds, increase government revenue through capital gains tax and improve transaction tracking by virtual asset service providers ( VASP) operating in India, the policy paper explained.
“The fiscal impact is particularly harsh given that India does not allow loss carry-forwards, which is uniquely discriminatory, even compared to other industry sectors in India,” notes the report
The impact of these taxes on crypto activities has led to a decline in the number of users participating with crypto exchanges in India. Time and again, exchanges have complained that they have had to take cost-cutting measures to keep their businesses afloat due to the reduced number of investors signing up for the platform.
The report has shown that the number of active users in India's crypto space will drop by 81 percent in 2023 alone. Several are even moving to currencies to avoid these laws.
Where does India stand on the crypto tax regime?
So far, the Indian government has not revealed whether it is even considering revising the crypto tax laws. Earlier this year, when Finance Minister Nirmala Sitharaman announced the interim budget before India held general elections, she omitted to mention the crypto sector.
So far, the government has not addressed the crypto sector's demand for lower taxes.
