The government’s annual budget, presented by Finance Minister Nirmala Sitharaman on Thursday, maintained the controversial tax deducted at source (TDS) policy for crypto transactions. Despite expectations for a change in the stiff taxes on crypto transactions, including a 30% tax on profits and a 1% TDS on all transactions, the budget remained silent on the issue. This comes despite efforts from the domestic crypto industry and a study from a think tank that pushed hard for a reduction in the TDS.
The lack of changes to the TDS policy is particularly disheartening for the crypto industry, given that it has been a major pain point since its introduction two years ago. Indian crypto exchanges have been struggling to survive, with many forced to extend their runways in response to the 1% TDS.
Dilip Chenoy, the chairman of the Bharat Web3 Association, the policy body advocating for India’s Web3 sector, expressed cautious optimism, stating that they did not expect significant changes in an interim budget but are eagerly anticipating changes after the elections. Chenoy highlighted the negative impact of high TDS and income tax rates, which have caused both creators and consumers to move out of India, affecting the prospects of Web3 in the country.
A study by the Esya Centre revealed that the government’s taxes have prompted as many as five million crypto traders to move their transactions offshore, costing the government a potential $420 million in revenue since July 2022.
While the government has not reduced the tax in the past two years, it recently took action against offshore crypto exchanges, which in turn brought crypto activity back to Indian exchanges.