India is not making moves to change its controversial #cryptocurrency tax policy, even as the election season approaches. The current regulations include a 30% tax on cryptocurrency profits and a 1% Tax Deducted at Source (TDS) on all crypto transactions. National Finance Minister Nirmala Sitharaman unveiled the interim budget in parliament and did not comment on changes to these taxes, in line with low expectations.
Election Year and Interim Budget
Expectations for changes in #tax policy were minimal as India approaches general elections in the next two months. Sitharaman did not make any changes to taxation, whether direct or indirect. During an election year, it is customary to present an interim budget to temporarily finance government expenditures. The full budget is usually expected in July after the elections. Surveys suggest that Prime Minister Narendra Modi and his Bharatiya Janta party have a chance at re-election.
Cryptocurrency Industry's Efforts to Reduce TDS
The Indian cryptocurrency industry has been lobbying intensely for the government to reduce the 1% TDS rate on crypto transactions to 0.01% since it was first announced two years ago. Indian crypto exchanges are facing challenges and are trying to find ways to grow, which has become difficult due to the high TDS.
Rajagopal Menon, Vice President of the WazirX cryptocurrency exchange, stated, "The integration of provisions for long-term funding of domestic crypto projects would benefit digital public infrastructure and the Prime Minister's aspirations for innovation, especially given India's crucial phase in the crypto revolution." It is expected that this proposal will soon be included in the government's agenda along with demands for a reduction in TDS rates to 0.01% and compensation for traders.
Tax Drove Traders to Cryptocurrencies Abroad
This tax policy prompted up to five million cryptocurrency traders to move their transactions abroad, costing India potential revenues of $420 million since the tax was introduced in July 2022, according to a study by the Esya Center.
Recently, the government has taken steps against foreign cryptocurrency exchanges, bringing activity back to Indian exchanges, and the cryptocurrency industry continues to seek relief from these tax burdens.
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