India’s Budget Snubs Crypto Industry, Government’s Tough Stance Remains

• India’s 2024–25 budget ignored the digital currency industry, raising concerns among Bitcoin enthusiasts and investors.
• Despite the global rise in crypto adoption, India’s high taxes and strict regulations continue to silence local cryptocurrency activity.
• The Indian crypto market saw a 97% drop in trading volumes, with the government’s tough stance and unchanged tax policies affecting investors.

India’s Union Budget surprised the Bitcoin community for 2024–25, which was unveiled on July 23. The absence of Finance Minister Nirmala Sitharaman’s remarks on the digital currency business alarmed enthusiasts and investors, contrary to earlier expectations.

The budget, while focusing on nine priorities for economic growth, notably agriculture and employment, omitted virtual currencies. This lack of mention highlights India’s reluctance to create an innovation-friendly and investment-attracting legal framework for digital assets. The global digital currency industry is witnessing varying levels of adoption and regulation, making India’s omission even more glaring.

High Taxes and Declining Activity

The framework for taxes on digital currencies did not alter, even with modifications to the equalization levy and the removal of the angel tax for entrepreneurs. As a result, cryptocurrency transactions in India are subject to 30% taxation plus an extra 1% source-deducted tax (TDS). Investors and digital currency exchanges have been greatly impacted by these strict regulations.

A report by the National Academy of Legal Studies and Research (NASLAR) revealed a 97% drop in trading volumes and an 81% decline in active users on Indian exchanges since these tax measures were implemented. The national treasury loses approximately 59 billion Indian rupees ($700 million) in tax revenue due to decreased activity.

However, reducing the TDS to 0.01% could potentially double these earnings. Interestingly, Sitharaman proposed a TDS reduction for e-commerce operators from 1% to 0.01%, but not for the crypto industry.

Government’s Stance and Industry Concerns

The Reserve Bank of India (RBI) has penalised and cautioned against digital assets’ speculative nature on numerous occasions. In 2018, the RBI prohibited financial institutions from offering services to the cryptocurrency industry; however, this prohibition was later overturned by the Supreme Court in 2020. The RBI keeps reminding people of the dangers of utilizing Bitcoin assets.

The local industry remains hopeful for a future reduction in taxes. Vishwanath, a prominent figure in the crypto community, believes that India may need to see more developed countries promoting crypto, announcing ETFs, or making it legal tender before making any tax amendments. Despite high local taxes, India leads globally in cryptocurrency adoption, topping Chainalysis’ 2023 Global Crypto Adoption Index.