No mention in Union Budget 2024-25

Indian government ignores cryptography

The release of India’s Union Budget 2024-25 has left a significant section of the country’s population pondering its implications, especially the cryptocurrency community, which is in a quandary.

On July 23, the budget presented by Finance Minister Nirmala Sitharaman left the digital currency industry unaddressed even after prior speculation and anticipation of potential regulatory clarifications or support measures.

The omission comes at a time when the global digital currency industry is experiencing varying levels of adoption and regulation, highlighting a stark contrast. India’s approach to the management of these digital assets.

Fiscal status quo continues in 2022: community reactions

The budget set out nine priorities for economic growth, including agriculture and employment, but not virtual currencies. This absence is seen as a failure to create a legal framework that generates innovation and attracts investment in a sector that is booming.

Apart from this, while some significant changes were proposed in the budget, such as the removal of the business angel tax for startups and a change in the equalization tax, none of these changes were reflected in the case of digital currency assets, leaving the existing digital currency tax frame unchanged.

The absence of any budget entry for digital currency has left the Indian digital currency community shocked and worried. Prominent figures such as developer Vijay Saran recently took to X to express their concerns over the plan, which does not even mention digital currency.

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According to Saran, the digital currency market left unaddressed in the budget suggests that the status quo of 2022 will continue, crypto transactions are taxed at 30% with an additional 1% withholding tax (TDS).

It is worth noting that these tax measures are among the strictest in the world, which has a significant impact on the operational dynamics of digital currency exchanges and investors in the country.

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Impact of Cryptocurrency Tax in India

The strict tax regime has already had a chilling effect on the digital currency market IndiaAccording to the National Academy of Legal Studies and Research (NASLAR), since the implementation of these taxes, trading volumes on Indian exchanges have fallen by 97% and active user participation has declined by 81%.

Trading volume of the six major Indian stock exchanges. |Source: NSLAR

NASLAR find that these collapses are hurting the digital currency space and causing significant losses to the national exchequer, estimated at 59 billion Indian rupees ($700 million) per year.

In contrast, a study published by NASLAR suggests that capping crypto TDS at 0.01% would allow the government to collect twice as much from the industry.

The value of the global market capitalization of digital currencies on the 1-day chart. Source: Crypto TOTAL Market Cap on TradingView.com

Featured image created with DALL-E, chart by TradingView

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