India's new budget has been announced, and there are interesting developments regarding the taxation of cryptocurrencies.

First, to summarize, the government has decided to keep the 30% tax rate on profits from cryptocurrency transactions and the 1% withholding tax in place. Industry voices demanding tax cuts were strong, but those expectations were not met. However, it’s not just about maintaining the tax rate; starting April 1st, a new penalty system will be introduced under the guise of strengthening compliance.

For businesses that fail to fulfill reporting obligations, fines will be imposed: ₹200 per day (about $2.20) for non-submission, and a flat ₹50,000 (about $545) for submitting incorrect information. This represents a stricter framework than before.

Market participants have mixed reactions to the continuation of India’s cryptocurrency taxation system. Asish Singhal, co-founder of CoinSwitch, points out that the current tax system taxes transactions without recognizing losses, which effectively burdens retail traders. He suggests lowering the withholding tax rate from 1% to 0.01%, which could improve liquidity and maintain transaction traceability while easing compliance.

In fact, many also point out that the heaviness of this tax regime is driving trading activity overseas. Industry groups have lobbied for months, but the government has chosen to tighten reporting obligations instead.

Looking at the Bitcoin market, it recently tested around $76,000 but is now trading around $74,600. On Binance’s perpetual market, the funding rate has been negative for 46 days, indicating persistent bearish positioning. According to Vetle Lunde of K33 Research, such long-term risk-off phases often serve as leading indicators of sharp rallies in history.

As India’s cryptocurrency taxation policy continues as is, it will be interesting to watch how the market reacts.