Indian exchanges are rejoicing over a recently announced crypto tax, but investors are not happy. Finance minister Nirmala Sitharaman declared all income from crypto transfers will be taxed at 30% at the budget session of parliament on Tuesday. 

The taxation on crypto is being interpreted as an end to years of uncertainty from the Indian government. But some are questioning whether the tax is less about bringing about regulation and more about punishing the years of unfettered growth.

“I think this [tax rate] is bizarre. It’s too much for small-time investors,” Kaparthi Jonnalagadda, a crypto investor, told Forkast. 

The high tax rate could pave the way for India’s planned central bank digital currency (CBDC) to thrive without competition from private digital assets. Sitharaman announced in the budget session that the RBI will launch its CBDC by the next fiscal year. 

The government did not admit to legalizing crypto through taxation, as the finance secretary clarified on Wednesday. Nevertheless, it has dispelled fears of a blanket ban that loomed over the industry for years. 

“The budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer,” Ashish Singhal, Founder and CEO of crypto exchange CoinSwitch Kuber, told Forkast in a statement.

Trading volume surged on some of the nation’s largest cryptocurrency exchanges in the wake of the announcement. 

Additionally, “the positive move by the regulators will legalize the billions of dollars invested by Indians in crypto assets and create a new tax revenue stream for the government,” according to BuyUcoin CEO Shivam Thakral. 

Some investors are agitated., interpreting the 30% tax on digital assets as punitive as it is now placed in the highest tax band in the country. Long-term capital gains investments are capped at 15% and short-term gains are also taxed at 15%.

“You’re classifying them as assets … [but] you cannot block your losses there, you cannot write your losses off with other income and whatever profit you make, you have to pay the high 30% tax, which I believe is very unfair,” crypto investor Pranav Shastri told Forkast. “You can’t all of a sudden overnight go from uncertain [about whether crypto is legal or not] to ‘give me some piece of your cake’ kind of a strategy.”

“We take the risk, we do the analysis, we do everything. And the government comes out of nowhere and it takes 30% of our money, for what?” Shastri added. Investors are also upset that the decision on  taxation of the asset was formalized before legislation on crypto. 

Crypto exchanges, however, remain hopeful that regulatory uncertainty that drove India’s blockchain brain drain may be over. 

“All those talented entrepreneurs, engineers, economists, editorial, etc., who wanted to be part of the Web3 industry now have clarity from the government,” Siddharth Menon, COO of Binance-owned WazirX, told Forkast. In the past, many candidates did not join us because of uncertainty from the government.” 

Retail investors told Forkast they may soon feel the pinch of the high tax rate, and are considering moving their assets into decentralized exchanges (DEX) or physically relocating to crypto-friendly jurisdictions.