Key Takeaways:
- Indian Budget 2024 Disappoints Crypto Community with No Tax Relief
- Finance Minister Nirmala Sitharaman did not provide any updates on crypto regulations and taxes.
- 30% tax on gains and 1% TDS on transactions unchanged
The Indian Budget 2024, presented on July 23 by Finance Minister Nirmala Sitharaman, has left the crypto community feeling neglected. The budget made no changes to the existing tax regime for Virtual Digital Assets (VDAs), ignoring pleas from local crypto advocates who had pushed for significant tax reductions.
Specifically, there was no adjustment to the current 1% tax deducted at source (TDS) on crypto transactions, which many blame for the industry’s sluggish performance.
Local crypto industry leaders had hoped for a reduction of TDS to 0.01% to stimulate growth and adoption.
Edul Patel, CEO and co-founder of Mudrex, highlighted that the decision to maintain the current tax rates could have both positive and negative impacts.
On the one hand, it provides predictability for existing investors. On the other hand, it may deter new investors and slow the sector’s growth.
The primary demand from India’s crypto community was to lower the controversial TDS from 1% to 0.01% and to introduce progressive taxes on gains rather than a flat 30% rate. Additionally, they sought allowances for offsetting losses against gains and pushed for a multi-agency regulatory framework.
Ashish Singhal, co-founder of CoinSwitch, labeled the unchanged tax policy a missed opportunity, stating, “On crypto, we were hopeful that the government will bring down taxation to make it at par with other asset classes. Unfortunately, that has not happened. It’s a missed opportunity to encourage startups and investors in the crypto space.”
The disappointment comes amidst speculation that the government’s decision might be influenced by recent security breaches, such as the WazirX wallet exploit, which resulted in the theft of over $230 million from the exchange’s reserves.Â
Despite these setbacks, India’s Web3 sector shows promise, with over a thousand startups and significant investments pouring in. A recent report by HashEmergent and KPMG noted that India’s Web3 sector received $250 million in investments in 2023, with Bengaluru emerging as a hub.
While the government has engaged with the Indian crypto industry and taken some measures to address their concerns, such as issuing notices to offshore exchanges for non-compliance with local laws, the lack of tax reforms in the 2024 budget is seen as a significant hindrance to the sector’s growth.
The crypto community remains hopeful for future adjustments that could foster a more supportive environment for blockchain-based startups and investors in India.
