Global: Indian Finance Minister Ignores Crypto Industry’s Budget Tax Plea

In her 2024 Union Budget speech on July 23, Indian Finance Minister Nirmala Sitharaman did not address the cryptocurrency sector, leaving existing tax regulations unchanged.

Local crypto advocates had lobbied for a reduction of the current 1% tax deducted at source (TDS) to 0.01%, citing it as a factor in the underperformance of the Indian crypto industry. Despite these appeals, Tuesday’s budget presentation—the first since Prime Minister Narendra Modi’s re-election for a third term—maintained the status quo on crypto taxation.

Sathvik Vishwanath, CEO of local exchange Unocoin, commented on the government’s decision, stating, “The government does not yet see crypto as a serious business in India. They compare it to gambling and betting.”

India’s current crypto tax regime, introduced in Sitharaman’s 2022 Budget speech, imposes a 30% flat tax on crypto profits and a 1% TDS on transactions. This stringent tax framework is often blamed for the significant drop in trading volumes on local exchanges.

A report by the National Academy of Legal Studies and Research (NASLAR) highlighted the dramatic impact of these tax measures: trading volumes on Indian exchanges plummeted by 97%, and active users decreased by 81%. NASLAR estimated that the national treasury is losing approximately 59 billion Indian rupees ($700 million) in tax revenue due to reduced activity on leading exchanges. The report suggested that reducing the crypto TDS to 0.01% could potentially double the government’s earnings from this sector.

While the crypto industry’s tax requests were ignored, Sitharaman did propose a reduction in TDS from 1% to 0.01% for e-commerce operators.

The Indian government has consistently issued warnings about the risks of trading cryptocurrencies. The Reserve Bank of India (RBI), the nation’s central bank, has historically taken a negative stance against cryptocurrencies. In 2018, the RBI banned financial institutions from servicing the crypto industry, a decision overturned by the Supreme Court in 2020. In its May 2024 bulletin, the RBI reiterated the speculative nature of crypto assets, a view it has held for over a decade. The bulletin also noted that decentralized finance (DeFi) activities are primarily driven by speculation rather than economic value.

Despite the harsh local taxes, India remains a global leader in cryptocurrency adoption, topping blockchain analytics firm Chainalysis’ 2023 Global Crypto Adoption Index. The local industry remains hopeful for future tax reductions. Vishwanath expressed optimism, saying, “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.”