As India prepares to announce its final budget for the fiscal year 2024-2025, there has been a growing call to revise the existing crypto tax laws in the country. A recent policy paper, compiled by the Centre for Tax Laws, NALSAR University of Law, and members of the crypto community, highlighted the need for a reevaluation of the tax structure.
One of the key concerns raised in the report is the 30 percent tax levied on all crypto gains since 2022. This tax rate is considered to be the highest among comparable economies like Ukraine, Canada, and the US. The report argues that such high taxes discourage investment in crypto assets and hinder the growth of the industry in India.
In addition to the high tax rate, the Indian government also imposes a one percent TDS on every crypto transaction. This withholding tax is aimed at tracking and monitoring crypto activities, which are generally anonymous. However, the report pointed out that this practice is not followed by other nations with significant exposure to virtual assets.
The excessive tax burden on crypto profits has had a significant impact on the number of users engaging with crypto exchanges in India. The report highlighted that there has been an 81 percent drop in active users in India’s crypto space in 2023 alone. Many users are resorting to foreign exchanges to avoid the high taxes imposed by the Indian government.
Despite the mounting pressure to revise the crypto tax laws, the Indian government has not yet indicated any intention to do so. Finance Minister Nirmala Sitharaman omitted any mention of the crypto sector in the interim budget announcement earlier this year. This lack of response has left many in the crypto community feeling neglected and unheard by the government.
The current crypto tax laws in India are posing a significant obstacle to the growth and development of the crypto industry in the country. Unless the government takes proactive steps to revise the tax structure and address the concerns of the crypto community, India risks falling behind in this rapidly evolving sector. It is crucial for policymakers to consider the long-term implications of high taxes on crypto activities and work towards creating a more conducive environment for innovation and investment in the digital asset space.
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