Cryptocurrency companies operating in India had a tough time in 2023. The government imposed a 1 per cent TDS tax directly on crypto companies.
Towards the year’s end, the financial intelligence unit issued a notice to 9 foreign cryptocurrency exchanges. These exchanges were found to be operating illegally in India as they didn’t follow the country’s money laundering laws.
As Finance Minister Nirmala Sitharaman gets ready to present the Interim Budget 2024-25 on February 1, crypto companies have sought some form of tax relief from the government.
“We hope that the Finance Ministry would reduce in the Tax Deducted at Source (TDS) rate from 1 per cent to 0.01 per cent. Additionally, the offsetting of losses against gains made should be allowed. The underlying objective is to ensure a level playing field in the cryptocurrency space, devoid of regulatory or tax arbitrage for any participant,”said Rajagopal Menon, VP of WazirX.
Crypto companies are also urging the government to reconsider its policies related to the regulatory framework for virtual digital assets. This includes the classification and taxation of these assets.
While such companies support the government’s move to implement integration of cryptocurrency under the purview of anti-money laundering law, their primary demand revolves around the tax rate at source.
Edul Patel, CEO of Mudrex, said, “The government’s commitment to fostering innovation and responsible growth in the crypto industry is evident through its proactive measures. The implementation of taxation, integration of cryptocurrencies into anti-money laundering/counter-terrorist financing (AML/CTF) frameworks, and issuance of notices to non-FIU compliant foreign entities highlight its dedication to creating a secure ecosystem for investors and businesses. However, the current imposition of a 1 per cent TDS on every transaction could potentially hinder cryptocurrency adoption.”
A Statista report shows that revenue in the cryptocurrency market in India is projected to reach $343.5 million in 2024. As per the report, revenue is expected to grow at a rate of 7.99 per cent, resulting in a projected total amount of $467.2 million by 2028.
