India's Crypto Tax Rules Remain Unchanged in New Budget

India's Finance Minister Nirmala Sitharaman presented the nation's budget for 2024-2025. She kept the controversial crypto tax rules unchanged. Despite numerous representations from the crypto industry which sought to reduce tax-deducted-at-source (TDS) on crypto transactions from 1% to 0.01%, no changes were made.

The industry's primary demands included the introduction of progressive taxes on gains instead of the flat 30% rate. They also wanted the ability to offset losses against gains. They advocated for multi-agency regulation. However, the government maintained its stance. This reflects its overall negative approach towards the sector.

Dilip Chenoy Chairperson of the Bharat Web3 Association, commented "We were hoping for some relaxation in the taxation framework on Virtual Digital Assets (VDAs). The absence of any announcement is not particularly disheartening, given the government's overall stance. We will continue to push for rationalization of the taxation framework."

Interestingly the government increased the long-term capital gains tax from 10% to 12.5%. They also raised short-term capital gains taxes from 15% to 20%. How will this impact crypto trading? Rajat Mittal, a Supreme Court crypto tax counsel suggests it might incentivize retail investors to shift from traditional assets like securities to cryptocurrencies. Crypto gains remain taxed at a flat 30%. Unlike securities, losses in crypto cannot offset gains.

On a positive note, the budget abolished angel tax for all classes of investors. This change is expected to bolster the Indian startup ecosystem. Sumit Gupta, co-founder of Indian crypto exchange CoinDCX expressed confidence. He believes this move will significantly support the Web3 sector in India.

This budget, the first since Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) formed a coalition government allocated significant funds for infrastructure projects. These projects will be in states allied with the BJP. The budget reflects Modi's vision for the next five years, aligning with the sentiment from recent election results.

In summary, while the crypto industry hoped for tax relief and regulatory changes, the unchanged crypto tax rules in the new budget indicate the government's cautious approach towards the sector. The abolition of the angel tax, however, offers a silver lining. This offers hope for India's burgeoning Web3 ecosystem.