Cryptos find no mention in Sitharaman's union budget speech

Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman did not share any updates on crypto regulations and taxes in her Budget speech on July 23, despite the country's largest crypto exchange WazirX currently being under scrutiny after assets worth $230-million were stolen from the exchange last week.

Reacting to this, Sumit Gupta, Co-founder, CoinDCX reiterated his expectations for rationalised virtual digital asset (VDAs) taxes, which is at present is 30 percent charged on income from crypto and 1 percent TDS (Tax Deducted at Source) added on every crypto transaction of Rs 10,000 in India.

"For investors, we had anticipated some relaxation to the taxation framework in this budget. We will continue to push for rationalization of the taxation framework which include reducing the TDS to 0.01%, allowing setoff of losses on VDA transactions and modifying the 30% tax on capital gains," he said.

CoinDCX has submitted data-backed quantitative analyses on the flight of capital and users, and the potential increase in government revenue should the taxation structure be revised, Gupta said.

Ashish Singhal, Co-founder of crypto unicorn CoinSwitch called this a missed opportunity. He said, "On crypto, we were hopeful that the government will bring down taxation to make it at par with other asset classes. Unfortunately, that has not happened. It’s a missed opportunity to encourage startups and investors in the crypto space."

According to Edul Patel, CEO and Co-founder of Mudrex the FM's decision to maintain the current tax rates on virtual digital assets (VDAs) has both pros and cons.

"On one hand, not updating the tax laws might deter new investors and slow the sector's growth, as the current tax regime could be a barrier to broader adoption and investment. On the other hand, keeping the tax rates stable provides predictability for existing crypto investors, which can help support steady market growth," he said.

From a regulatory standpoint, India continues to work with the G20 nations aligned with the ministry’s view of having a common global regulatory framework.

The government has been in talks with the Indian crypto industry and has taken measures in the past months to meet some of their demands. These include sending show-cause notices to offshore crypto exchanges such as Binance and Kucoin in December, for not being compliant with the local anti-money laundering laws and not getting registered in the country.

This led to Indian retail crypto investors opting for offshore exchanges to evade the high taxes.

These exchanges recently registered under FIU-IND after paying a fine and are back-servicing Indian users.

Among their demands from the Union Budget 2024, crypto industry players were expecting the government to focus on creating a level playing field with the offshore exchanges by expanding the scope of the TDS mandate to explicitly include them.

Additionally, Indian exchanges sought a reduction in the TDS rate under Section 194S(1) from 1 percent to 0.01 percent and increase in the threshold limit of charging TDS from every transaction of Rs 10,000 and above to Rs 5,00,000.