India can earn over Rs 50 billion from revamping crypto tax laws: report
Ahead of India’s final budget announcement for FY2024-2025, a policy paper has outlined the reasons why the government should consider revising the crypto tax laws in the country. The report was jointly compiled by the Centre for Tax Laws, the Hyderabad-based NALSAR University of Law and several individual members of the crypto community in India. The report claimed that India could raise Rs. 5,144 crore through capital gains by 2027 only if the country revises its crypto laws.
Indian Crypto Tax Laws
Since 2022, India has imposed a 30 percent tax on all crypto profits. In addition, it deducts one percent TDS (tax withheld at source) on every crypto transaction. The finance ministry wants to keep a track of all crypto transactions, which are otherwise largely anonymous.
About the 30 percent tax on crypto profits in India, the report said that it was highest in comparable economies such as Ukraine, Canada and the US. Commenting on the TDS law, the report noted that no other country with significant exposure to virtual assets imposed “such a withholding tax”.
A reduction in this one percent TDS rebate could reduce overall TDS refunds, increase government revenue through capital gains tax and improve transaction monitoring by the virtual asset service providers (VASPs) operating in India, the policy document explained.
“The tax impact is particularly harsh as India does not allow loss carry-forward and carry-forward, which is uniquely discriminatory even when compared to other industrial sectors in India,” the report said.
The impact of these taxes on crypto activities has led to a decline in the number of users involved in 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 on the platform.
The report has revealed that the number of active users in the Indian crypto space has dropped by 81 percent in 2023 alone, with several even moving to foreign exchanges to circumvent these laws.
What is India’s stance on cryptocurrency tax regime?
So far, the Indian government has not announced whether it is considering revising crypto tax laws. Earlier this year, when Finance Minister Nirmala Sitharaman announced the interim budget ahead of India’s general elections, she left the crypto sector out of the picture.
The government has so far failed to respond to the crypto sector’s demand for tax cuts.
