A policy paper has laid out the reasons why the Indian government should think about changing the crypto tax laws before it releases its final budget for FY2024-2025. The report was put together by the Centre for Tax Laws, the NALSAR University of Law in Hyderabad, and some members of the Indian crypto community working alone. The report said that India could get Rs. 5,144 crores in capital gains by 2027, but only if its crypto laws were changed.
The crypto tax laws in India
The Indian government has been taxing all crypto gains at 30% since 2022. On top of that, 1% TDS (tax deducted at source) is added to every crypto transaction. The Finance Ministry wants to keep track of all crypto transactions, which are usually done in secret.
The report said that India’s 30% tax on crypto profits was the highest compared to countries like Ukraine, Canada, and the US. The report talked about the TDS law and said that no other country that has a lot of virtual assets did not have “such withholding tax.”
The policy paper said that lowering this 1% TDS cut could lead to fewer overall TDS refunds, more money for the government in the form of capital gains taxes, and better transaction monitoring by India’s virtual asset service providers (VASPs).
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The report said, “The tax effect is especially harsh because India does not allow set off and carry forward of losses, which is unfair even when compared to other industry sectors in India.”
Because these taxes have an effect on crypto activities, fewer people in India are using crypto exchanges. Many times, exchanges have said that they had to cut costs to stay in business because fewer investors were signing up for their platforms.
The report shows that in 2023 alone, the number of active users in India’s crypto space dropped by 81%. Some are going so far as to use foreign exchange to get around these laws.
How does India feel about the plan to tax crypto?
As of now, the Indian government has not said whether it is even thinking about changing the tax laws on crypto. When India’s Finance Minister Nirmala Sitharaman announced the interim budget earlier this year, before the general elections, she didn’t talk about the crypto sector.
The crypto sector has been asking the government to lower taxes, but so far, the government has not responded.
Thoughts
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