India has not introduced any changes to its controversial tax deducted at source (TDS) policy that is affecting the crypto industry.
The nation’s finance minister Nirmala Sitharaman revealed the budget in parliament on Thursday as usual. Expectations were low for a change in the stiff 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 because of efforts from the domestic crypto industry and a study from a think tank pushed hard for a reduction in the TDS.
In general, this budget had lower expectations in terms of the financial sector as India is headed for general elections in the next two months. Sitharaman announced no changes in taxation – both direct and indirect.
In the election year, the finance ministry doesn’t usually present a full budget but an interim one to fund its expenses for a short time. 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 polls.
India’s crypto industry has urged the government to reduce the 1% TDS to 0.01% ever since it was first announced two years ago. Indian crypto exchanges have been in survival mode, trying to extend their runways in response to the 1% TDS.
“Digital public infrastructure and the PM’s aspiration for [innovation] will benefit from integrating provisions for long-term financing of domestic crypto projects given how India is at a pivotal phase in the crypto revolution,” said Rajagopal Menon, vice president of cryptocurrency exchange WazirX. “We expect these developments to factor in the government’s agenda along with our existing requests for a reduction in TDS rates to 0.01% and offset of losses for traders.”
The tax prompted as many as five million crypto traders to move their transactions offshore, costing the government a potential $420 million in revenue since it was introduced in July 2022, according to a study by the Esya Centre.
While the government hasn’t reduced the tax in the past two years, last month it took action against offshore crypto exchanges, which in turn brought crypto activity back to Indian exchanges.