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India maintains high taxes on cryptocurrencies as interim budget unveiled in election year
India has not made any changes to its controversial Withholding Tax (TDS) policy that affects the crypto industry.
The country’s Finance Minister Nirmala Sitharaman unveiled the budget in Parliament on Thursday, as usual. Expectations were low for a change in the high taxes on crypto transactions, which include a 30% tax on profits and a 1% TDS on all transactions. However, there was a glimmer of hope due to the efforts of the domestic crypto industry and a study by a think tank that strongly pushed for a reduction in the TDS.
Overall, the budget has been accompanied by lower expectations in terms of the financial sector, with India heading towards general elections in the next two months. Sitharaman has not announced any changes in taxation, either direct or indirect.
In an election year, the finance ministry usually does not present a full budget but an interim budget to fund its expenditures for a short period. A full budget is usually expected in July after the results. Prime Minister Narendra Modi and his Bharatiya Janta Party are expected to return to power, according to forecasts. polls.
The Indian crypto industry has been urging the government to reduce the TDS from 1% to 0.01% since it was first announced two years ago. Indian crypto exchanges are in survival mode, trying to extend their tracks in response to the 1% TDS.
Dilip Chenoy, president of the Bharat Web3 Association, the policy body that advocates for the Web3 sector in India, said that since this is an interim budget, we do not expect any major changes, but “we are looking forward to the changes that will be announced after the elections.”
“High TDS and income tax rates continue to be barriers that have pushed creators and consumers out of India,” Chenoy said. “This migration has significantly impacted the prospects of Web3 in India. We have and will continue to highlight these concerns with key stakeholders.”
Taxes imposed by the Indian government have prompted up to five million cryptocurrency traders to move their transactions abroad, costing the government a potential $420 million in revenue since its introduction in July 2022, according to a study by the Esya Center.
“Digital public infrastructure and the Prime Minister’s aspiration to [innovation] “India will benefit from incorporating provisions for long-term funding of domestic crypto projects, given that India is at a pivotal phase of the crypto revolution,” said Rajagopal Menon, vice president of cryptocurrency exchange WazirX. “We expect these developments to take into account the government’s agenda as well as our existing demands for reduction of TDS rates to 0.01% and compensation of losses to traders.”
UPDATE (February 1, 2024 9:00 UTC): Adds quote from Dilip Chenoy.