On July 23, Indian Finance Minister Nirmala Sitharaman delivered the 2024 Union Budget without addressing cryptocurrencies, leaving the stringent tax regulations unaltered. The current regime includes a 1% tax deducted at source (TDS) and a 30% flat tax on crypto profits, both introduced in Sitharaman’s 2022 Budget speech.
Crypto advocates in India had urged the government to lower the TDS to 0.01%, arguing that the high tax rate has hampered the industry’s growth. However, the unchanged tax rules reflect the government’s stance on crypto, which it still views cautiously. Sathvik Vishwanath, CEO of local exchange Unocoin, noted that the government equates cryptocurrencies to gambling and betting.
Since the implementation of the high taxes, trading volumes on Indian crypto exchanges have plunged by 97%, and active users have declined by 81%, according to a report by the National Academy of Legal Studies and Research (NASLAR). The report estimates that the national treasury is losing about 59 billion Indian rupees ($700 million) in tax revenue due to decreased activity on major exchanges. It suggests that reducing the TDS to 0.01% could potentially double the government’s earnings from the crypto sector.
Despite the crypto industry’s disappointment, Sitharaman did propose a TDS reduction from 1% to 0.01% for e-commerce operators. This move highlights the government’s cautious approach to cryptocurrencies, which have been subject to numerous warnings.
The Reserve Bank of India (RBI) has consistently taken a negative stance on cryptocurrencies. In 2018, the RBI banned financial institutions from servicing the crypto industry, a ban that the Supreme Court overturned in 2020. In its May 2024 bulletin, the RBI reiterated its concerns about the speculative nature of crypto assets and the risks associated with decentralized finance (DeFi) activities.
Despite the heavy taxation, India remains a leader in cryptocurrency adoption, topping the 2023 Global Crypto Adoption Index by blockchain analytics firm Chainalysis. The local crypto industry remains hopeful for future regulatory changes. “Our country will need more developed countries promoting crypto, announcing ETFs, or making it legal tender before we can make a strong decision to amend taxation for the industry,” said Vishwanath.
As India continues to dominate in global crypto adoption, the industry remains vigilant for potential regulatory shifts that could create a more supportive environment for digital assets.
