Key Points
- India’s upcoming budget is expected to continue the 1% tax-deducted-at-source (TDS) on cryptocurrency transactions.
- The Bharat Web3 Association (BWA) is pushing for tax reforms and clearer regulatory guidelines for the crypto market.
India’s cryptocurrency market is likely to continue facing a controversial tax policy despite increasing Bitcoin prices and calls for reform. The Finance Minister, Nirmala Sitharaman, is anticipated to uphold the 1% TDS on crypto transactions in the forthcoming budget, to be announced on Tuesday. This policy has been a challenge for the industry since its introduction two years ago.
BWA’s Fight for Crypto Reforms
The upcoming budget is significant as Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) has secured a third term through a coalition government. The necessity to satisfy alliance partners demanding over $15 billion likely surpasses the crypto industry’s requests.
The Bharat Web3 Association (BWA), the industry’s leading voice, has been critical of the 1% TDS policy. The BWA has persistently asked the government to reduce the tax to 0.01%, arguing that the current rate disadvantages India.
The association highlights that the high tax is causing capital flight, with investors moving their transactions to overseas exchanges and Decentralized Exchanges (DEXs), leading to potential revenue loss for the government.
While a reduction in TDS seems unlikely in the near future, the BWA remains hopeful for progress in other areas. The association is advocating for a tiered tax structure to replace the current flat 30% tax on crypto gains with a progressive system. They also push for allowing investors to offset losses against gains, a standard practice in other asset classes.
The absence of comprehensive crypto regulation is another issue for the industry. Senior Finance Ministry officials have hinted at upcoming legislation, but the details are not yet known. The BWA sees clear regulatory guidelines as crucial for fostering a healthy crypto ecosystem in India.
Government’s Shift Towards Crypto Regulation
A positive development is the BWA’s invitation to pre-budget consultations with the ministry, a change from previous years. However, the recent $230 million hack of WazirX, a prominent Indian crypto exchange, might have pushed crypto further down the government’s priority list.
Rajat Mittal, a Supreme Court crypto tax counsel, suggests that the government seems more focused on stringent regulation at this point. While the high TDS might be driving investors away, a rate reduction seems unlikely in the near future.
The upcoming budget announcement might not deliver the significant win the crypto industry is hoping for, but the BWA’s inclusion in pre-budget talks indicates a potential shift towards greater dialogue.
