Cryptocurrency companies operating in India faced tough times in 2023. The government imposed a 1 percent TDS tax directly on cryptocurrency companies.
Towards the end of the year, the financial intelligence unit issued a notice to 9 foreign cryptocurrency exchanges. These exchanges were found to be operating illegally in India because they did not follow the country's money laundering laws.
As Finance Minister Nirmala Sitharaman prepares to present the interim budget 2024-25 on February 1, crypto companies have sought some form of tax relief from the government.
โWe hope that the Finance Ministry will reduce the rate of Tax Deducted at Source (TDS) from 1 per cent to 0.01 per cent. In addition, offsetting losses against profits should be permitted. The underlying objective is to ensure a level playing field in the cryptocurrency space, with no regulatory or tax arbitrage for any participant,โ said Rajagopal Menon, Vice President, 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 these companies support the government's decision to implement the integration of cryptocurrencies into the ambit of anti-money laundering law, their main demand revolves around the tax rate at source.
Edul Patel, CEO of Mudrex, said: "The government's commitment to encouraging innovation and responsible growth in the cryptocurrency industry is evident through its proactive measures. The implementation of taxes, the integration of cryptocurrencies in the combating money laundering and terrorist financing (AML/CTF) and issuing notices to foreign entities that do not comply with the FIU highlight its dedication to creating a safe ecosystem for investors and businesses. However, the current imposition of โa 1 percent TDS on every transaction could potentially hamper cryptocurrency adoption.โ
A report by Statista shows that revenue in the cryptocurrency market in India is projected to reach $343.5 million by 2024. According to the report, revenue is expected to grow at a rate of 7.99 percent, which which will result in a total projected amount of $467.2 million by 2028. .
