On 1st February, as has been the norm, the Indian finance minister will present the country’s national budget in the Parliament. One of the sectors that’s keen to see some returns come its way is the cryptocurrency sector. Those involved in the sector want Mrs. Nirmala Sitharaman, who’s the finance minister, to come up with a simplified tax structure around it. They believe this will help in attracting more investors towards it, while the current high tax norms act as a deterrent in harnessing the potential of cryptocurrency and its trading in the country.
What are the crypto-related tax norms in India?
Earlier, in 2022, Mrs. Sitharaman-led ministry had imposed a levy of 1% as TDS (Tax Deducted at Source) on any transaction involving cryptocurrency. In addition, her ministry had also imposed a steep 30% tax on any income generated through crypto-related transactions.
In addition to these taxes, the ministry also severely curtailed the scope of any deductions for the investors. Furthermore, in case of losses, the investors couldn’t offset them from any profits they stood to make, or had made through transactions of these VDAs (Virtual Digital Assets).
Understandably, this made investing in cryptocurrency a tedious affair with reduced gains and substantially high taxation pay-offs to the authorities.
From the horse’s mouth: The stakeholders’ grievances
For starters, the cryptocurrency industry players are keen on the minister bringing down the TDS to 0.01%. In an article published on The Mint, crypto exchange, Mudrex’s chief executive and co-founder, Edul Patel, spoke about how such a reduction could help propel the sector forward in India.
“The 1% TDS on crypto transactions led many investors and traders to turn towards foreign exchanges, making it harder for the government to track activity… As this year’s budget nears, we look forward to a more balanced and progressive approach to encourage innovation and support sustainable growth for the sector. A reduction of TDS down to 0.01% and the allowance for offsetting losses could significantly benefit investors and drive positive momentum in the industry.”
Patel’s sentiments were echoed by Pi24’s co-founder Avinash Shekhar. Shekhar, who also serves as the crypto trading platform’s chief executive, said, “For the development of the crypto industry in India, I believe that the Union Budget 2025 should target the reduction of tax on virtual digital assets below 30% and cut the TDS on all transactions from 1% to 0.01%. It is equally important to provide for the set-off and carry-forward of losses in VDA transactions. These reforms seem necessary to create a level playing field for crypto investors and traders.”
What are the expectations from the cryptocurrency sector’s stakeholders?
The industry representatives also feel that the financial and regulatory policies of the Indian government vis-à-vis digital currencies, blockchains and Web3 need to be particularly focused towards propelling these areas forward. At the same time, they also want the Indian government to make sure that any policies that the finance ministry comes up with, are mindful of investors’ security, ensure the transactions are transparent and above all, are consistent and aligned with global norms so that India finally comes to be on par with the rest of the world in a sector that’s constantly evolving as it remains revolutionary.
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