India is expected to maintain its contentious tax-deducted-at-source (TDS) policy on cryptocurrency transactions when Finance Minister Nirmala Sitharaman unveils the comprehensive budget for 2024-2025 on Tuesday, experts suggest.

This budget marks the first since Prime Minister Narendra Modi secured a third consecutive term. However, the political landscape has shifted, as Modi’s Bharatiya Janata Party (BJP) unexpectedly did not achieve a majority, necessitating a coalition government. The budget is anticipated to reflect the demands of his alliance partners, who have already requested over $15 billion in funding for the coming years.

For the crypto sector, the TDS policy remains a critical concern. The Bharat Web3 Association (BWA) has consistently advocated for reducing the tax from 1% to 0.01% since its inception two years ago. The industry body has presented data from various sources, including a think tank study, to substantiate their case for a reduction. They argue that lowering the TDS rate will encourage more transactions to stay within the country, thereby increasing government revenue.

Read more: South Korea Contemplates Further Deferment of Crypto Gains Tax Amidst Investor Discontent

“I don’t foresee the 1% TDS being reduced in the near term, despite it being necessary,” stated Punit Agarwal, founder of the crypto taxation platform KoinX. “The current rate prompts capital to migrate to international exchanges and decentralized exchanges (DEXs), ultimately resulting in a loss for the government.”

Additional requests from the industry include implementing progressive taxes on gains instead of the current flat 30% rate and permitting losses to offset gains. They have also called for multi-agency regulation.

Despite the unexpected election outcome necessitating coalition concessions and last week’s $230 million hack of the crypto exchange WazirX—which may have deprioritized crypto issues—BWA officials remain hopeful that at least one of their three main requests will be addressed.

The BWA also seeks clear regulatory guidelines. While India lacks comprehensive crypto regulations, senior Finance Ministry officials have indicated plans to propose draft legislation to parliament.

A glimmer of hope for the association is that they were invited to discussions with the ministry as part of the pre-budget consultations, a contrast to 2023’s pre-interim budget scenario. Nevertheless, ministry officials “did not give us any sense or comment at all,” according to R Venkat, a Bharat Web3 Association member who attended the meeting. The Finance Ministry declined to comment.

“High TDS may have driven retail investors to offshore exchanges, but the government’s focus on stringent regulation suggests that a rate reduction is unlikely,” noted Rajat Mittal, a Supreme Court crypto tax counsel. “The necessity for robust oversight in the digital asset sector is deemed more critical than alleviating industry concerns.”