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What bitcoin tax reforms are available to investors this time around in the Union Budget 2025? Here are the opinions of specialists.
What bitcoin tax reforms are available to investors The possible reforms that could provide clear regulations and tax breaks for virtual digital assets (VDAs) have stakeholders feeling hopeful.
Budget 2025: Since the government imposes stringent controls on the cryptocurrency industry, taxes have emerged as a significant consideration for Indian investors. The bitcoin industry is excited about the impending Union Budget for the fiscal year 2025–2026. What bitcoin tax reforms are available to investors
A major decision that clarifies the tax treatment of cryptocurrencies in India was recently rendered by the Income Tax Appellate Tribunal (ITAT) in Jodhpur. The ruling, which classifies cryptocurrencies as capital assets, affects the taxation of cryptocurrency sales proceeds, especially for transactions that occurred before the implementation of unique rules for Virtual Digital Assets (VDAs) in 2022. What bitcoin tax reforms are available to investors
Budget 2025: Since the government imposes stringent controls on the cryptocurrency industry, taxes have emerged as a significant consideration for Indian investors. The bitcoin industry is excited about the impending Union Budget for the fiscal year 2025–2026. What bitcoin tax reforms are available to investors
A major decision that clarifies the tax treatment of cryptocurrencies in India was recently rendered by the Income Tax Appellate Tribunal (ITAT) in Jodhpur. The ruling, which classifies cryptocurrencies as capital assets, affects the taxation of cryptocurrency sales proceeds, especially for transactions that occurred before the implementation of unique rules for Virtual Digital Assets (VDAs) in 2022. What bitcoin tax reforms are available to investors
Cryptocurrency taxes
It is significant to remember that, although they are not regarded as legal cash, cryptocurrencies are classified as virtual digital assets under Section 2(47A) of the Income Tax Act. As a result, the Income Tax Department (ITD) has not yet released detailed regulations regarding the taxation of cryptocurrency.
Sections 115BBH and 194S of the Income Tax Act, in particular, contain pertinent rules that regulate the taxation of virtual digital assets (VDAs). These clauses impose a 1% Tax Deducted at Source (TDS) on transactions and a flat 30% tax on income from VDA sales. What bitcoin tax reforms are available to investors
The Center matched the income from gambling and lotteries by imposing a 30% tax on earnings from Virtual Digital Assets (VDAs) in 2022. Moreover, cryptocurrency transactions exceeding Rs 10,000 were subject to a 1% Tax Deducted at Source (TDS). Enhancing accountability and transparency in the quickly expanding cryptocurrency industry was the aim of these measures.
Since the present crypto tax regime was put into effect in 2022, there have been discussions that have prompted industry analysts to predict possible modifications meant to promote the sector’s expansion and advancement. What bitcoin tax reforms are available to investors
What the industry desires
TDS and the high tax rate have drawn criticism for stifling local platform trading. In order to avoid these taxes, many users have chosen to switch to international exchanges, which has reduced the Center’s revenue. According to industry estimates, the movement of Indian cryptocurrency dealers to foreign platforms as a result of the 1% TDS has potentially cost the government $420 million in lost revenue. What bitcoin tax reforms are available to investors
Furthermore, one of the biggest challenges for investors has been the inability to balance losses against gains in VDA trades. The current tax framework for cryptocurrencies does not permit the utilization of losses to lower tax burden, in contrast to traditional asset classes, which results in higher effective taxes for investors. What bitcoin tax reforms are available to investors
According to experts, there are requests to expand the TDS mandate to particularly cover offshore platforms in order to stop customers from moving to foreign exchanges. This policy could encourage better tax compliance and a more equitable domestic exchange market.
Additionally, analysts believe that the Finance Ministry ought to think about reducing the TDS on transactions from 1% to 0.01% and the tax on virtual digital assets (VDA) to less than 30%. It’s also crucial to put in place a set-off and carry-forward clause for losses in VDA transactions.
The budget should lower the TDS on all transactions from 1% to 0.01% and lower the tax on virtual digital assets (VDA) to 30%. To level the playing field for cryptocurrency, several reforms are required.
Frequently Asked Question
As per the existing framework, income from Virtual Digital Assets (VDAs), including cryptocurrencies, is taxed at a flat rate of 30% under Section 115BBH of the Income Tax Act. Additionally, a 1% Tax Deducted at Source (TDS) applies to transactions exceeding Rs. 10,000 under Section 194S. Cryptocurrencies are not considered legal tender but are categorized as virtual digital assets under Section 2(47A) of the Income Tax Act.
The ITAT in Jodhpur classified cryptocurrencies as capital assets, influencing how their sales proceeds are taxed. This ruling is particularly significant for transactions that occurred before the implementation of specific rules for VDAs in 2022, offering more clarity on their tax treatment.
The current tax framework, including a high tax rate and 1% TDS, has led to reduced trading activity on domestic platforms, with many investors moving to international exchanges to avoid these taxes. Additionally, the inability to set off losses against gains in VDA trades results in a higher effective tax burden for investors. Reforms are being sought to address these challenges and encourage growth in the sector.
Experts propose reducing the TDS rate on transactions from 1% to 0.01% and lowering the flat tax rate on VDA income from 30% to a more competitive level. They also recommend allowing investors to set off losses against gains in VDA trades, similar to traditional asset classes, to create a fairer tax regime.
Expanding the TDS mandate to include offshore platforms could discourage investors from shifting to foreign exchanges, thereby boosting domestic trading activity. This measure is expected to improve tax compliance and help the government recover potential revenue losses while ensuring a level playing field for Indian and international platforms.
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