(Kitco News) – While many countries around the world have signaled an openness to blockchain technology and a willingness to integrate crypto into their societies, India remains a staunch holdout as its 2023 budget maintains the restrictive crypto tax rules that were in place in 2022.
Many in the Indian crypto community were hoping for some sort of reprieve from the high crypto tax regime which was first implemented in March of last year, but it appears as though they will need to wait at least one more year based on the union budget presented on Wednesday. Currently, the country levies a 30% tax on all crypto profits and a 1% tax deducted at source (TDS) on all crypto transactions.
Indian Finance Minister Nirmala Sitharaman presented the new budget, which announced key changes to income tax rate slabs but failed to mention cryptocurrencies, central bank digital currency (CBDC), or blockchain technology.
In addition to maintaining the high crypto tax rules, the government also added stipulations that could potentially lead to a fine or jail time for non-compliance with the TDS provision. The fine would be equivalent to the tax liability of the transaction while offenders also risk the possibility of spending three to 84 months in jail for failure to comply.
Regulators originally implemented TDS on all crypto transactions to help determine the total number of Indian citizens that are actively using cryptocurrencies. The government will get its first chance to review this data as Indians file their income tax returns beginning in May.
On Monday, Subhash Chandra Garg, the former Finance Secretary of India, stated that the government needed to provide more clarity on crypto taxes but warned that “we might not see any new changes in the upcoming budget 2023.” Chandra previously served as the chairman of the committee that drafted the first crypto bill.
The next step in the process is for India’s Parliament to adopt the new provision and enact it into law. This is the expected outcome due to the fact that Prime Minister Narendra Modi’s party – which has taken a hardline approach to regulating cryptos – controls both houses of the legislative body. If accepted, the provision would take effect on April 1.
Prior to the budget release, many in the Indian crypto industry were hoping that the TDS would be reduced to 0.01%, or at a minimum 0.1%, but the government thought otherwise. Some have warned that keeping the restrictive tax regime in place is a death knell for crypto businesses in the country.
“No changes to crypto taxes, leaving Indian crypto companies on the Stairway to Heaven,” said Rajagopal Menon, Vice President of Indian crypto exchange WazirX. “There is uncertainty because of high taxes & a lack of a solid regulatory framework which are stifling progress in the industry. We hope that the government will reconsider its position on crypto taxes.”
Last year, India signaled that it wanted to focus on developing a global approach to crypto regulations with a clearly defined common taxonomy, which is possibly a factor in the absence of any mention of crypto in the union budget. While the country has shown little interest in the wider adoption of decentralized cryptocurrencies, it is well on its way to developing its own central bank digital currency – the e-rupee – with pilot tests currently underway for banking institutions and the general public.
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