India's crypto industry is facing fresh uncertainty after the country's government avoided lowering its high tax rate on cryptocurrencies during its budget meeting.
In a parliamentary session on Wednesday, India’s finance minister Nirmala Sitharaman failed to provide an update on crypto taxes, and made little mention about anything related to digital assets.
Instead, Sitharaman reiterated the government's cautious stance towards cryptocurrencies in the 414-page Economic Survey 2022-23, stating that recent events such as the FTX collapse have "placed a spotlight on the vulnerabilities in the crypto ecosystem".
"Crypto assets are self-referential instruments and do not strictly pass the test of being a financial asset because it has no intrinsic cashflows attached to them," she elaborated
In April, the Indian government implemented a 30% tax on crypto gains – equivalent to India’s highest income tax bracket. The high tax rate resulted in a sharp decline in crypto activities, with trading volume on top Indian crypto exchanges falling by up to 70% within 10 days, according to Indian blockchain analytics firm Crebaco, CoinTelegraph reported.
Read more: Inside India’s Growing Web3 Ecosystem
Furthermore, the government introduced an additional 1% transaction deduction at source (TDS) in July, which means that crypto users in the country have to pay an additional 1% fee on every transaction.
While, India's crypto community had been hopeful that the budget meeting would provide more clarity on crypto taxes, some also noted that the government would likely need more time to study the industry thoroughly.
“The Indian government needs to have enough data for an extended period of time, say 1-2 full financial years, to analyze and make amendments as necessary. Hence no significant news was expected on the crypto industry anyway. We may expect some amendments in due course or during the next budget," Sathvik Vishwanath, co-founder and CEO of Indian exchange Unocoin, told Cointelegraph.
Last month, Reserve Bank of India (RBI) governor Shaktikanta Das warned that private cryptocurrencies could cause the next financial crisis if they continue to be unregulated.
Still keen on the tech
Despite the Indian government’s current ambiguous approach to crypto, it appears keen on exploring the use cases of DLTs (distributed ledger technologies), particularly on the CBDC (central bank digital currencies) front, just like many other Asian countries.
The central bank has been pushing to introduce its own CBDC (central bank digital currency). It has commenced the testing of its retail CBDC, the e₹-R (e-rupee), in Mumbai, New Delhi, Bengaluru and Bhubaneswar, with the initial participation of four banks, including the State Bank of India, ICICI Bank, Yes Bank and IDFC First Bank.