A well-defined regulatory framework, reduction in capital gains and transaction taxes as well as treating capital gains from crypto assets the same as other income sources are some of the key expectations of the crypto industry from the upcoming Union Budget 2025.
Industry experts believe that introducing crypto taxation laws in 2023 was a positive step that showed India’s willingness to adopt a progressive approach, but now is the time for the government to treat the crypto industry on par with other industries.
Clear regulatory framework
Even as crypto taxation laws were earlier brought in, the government did not address the legality of such assets, which has been a long-standing demand of the crypto industry.
“India’s stance on crypto regulation is being followed by nations worldwide. It is vital for the global crypto ecosystem’s growth and for the country’s dominance in becoming a financial and business hub. A balanced approach in the 2025 Budget could provide immense potential for innovation and financial inclusion for crypto,” an industry expert said.
Another industry expert hopes that Budget 2025 brings in policies that incentivise innovation, such as subsidies or tax breaks for blockchain and Web3 startups. “Such measures will position India as a global hub for decentralised finance, digital identity solutions, and asset tokenisation,” he said.
Another industry expert, believes that the creation of a dedicated cryptocurrency regulatory body is expected to offer clearer oversight.
Consumer protection
The year 2024 saw a significant growth of crypto assets, marked by Bitcoin surpassing the $100,000 level and a surge in institutional investment.
In such a year, Indian investors displayed a growing interest in meme coins. Dogecoin topped the list of the most invested coins while Shiba Inu coin led the way for the most traded coins, showed a report by CoinSwitch.
The $230 million hacking of the leading crypto exchange WazirX in July 2024 also highlighted the need for crypto regulation in India.
“We strongly believe that a balanced regulatory framework is key to unlocking the full potential of the virtual digital assets (VDAs) space in India. Such a framework should encourage innovation, promote transparency, and ensure robust investor protection,” Another industry expert said.
Lower taxes
Budget 2022-23 had mandated that gains arising from VDAs or crypto assets be taxed at a flat rate of 30 percent irrespective of the individual’s income tax slab rate. In addition, a 1 percent tax deducted at source (TDS) was introduced on every transfer of such assets.
“The cryptocurrency sector has faced numerous challenges, particularly due to the high taxation imposed since 2022. We think the government will recognise the need for a more favourable regulatory environment, which includes lowering the current 1 percent TDS and 30 percent capital gains tax on VDAs to levels that help the industry grow and come up with new ideas,” Another industry expert said.
Parity with other assets
In comparison to the higher rate of capital gains tax that the crypto segment faces, selling listed securities such as shares and equity mutual funds within a year invites a short-term capital gains (STCG) tax of 20 percent. The long-term capital gains (LTCG) tax kicks in if the securities are sold after a year of purchase, attracting a tax of 12.5 percent on gains of over Rs 1.25 lakh in a year.
Further, a key benefit of investing in traditional assets such as stocks, gold and bonds is the facility to set off losses in one asset against gains in another during that particular year and carry forward unadjusted losses for future adjustments. However, the losses from one crypto asset cannot be adjusted against gains from another, and no carry-forward of losses is allowed.
“Allowing crypto investors to offset their losses against gains, like in traditional markets, would encourage more participation and bring much-needed clarity,” Another industry expert said.
As per industry experts, clear regulations, a reduced TDS and tax rationalisation on crypto transactions, and incentives for blockchain and AI innovation can empower the Indian ecosystem and businesses to thrive in the promising sector.
“With the US taking strides in regulating crypto assets, India should not lag and lose a golden opportunity. By bringing in transparency, regulation and reduced tax burden, India can emerge as a global leader in digital asset adoption, driving economic growth and innovation,” Another industry expert said.
