Notwithstanding an arguably bad year that cryptocurrency players have left behind in 2023, this New Year has kicked off on an optimistic note with a massive surge in bitcoin’s prices and much-awaited approval to spot bitcoin ETF by US regulator SEC. The landmark move has led to a spike in bitcoin prices, which topped $47,000.
Now that the entire industry is eagerly awaiting the interim Union Budget 2024, they look forward to a reduction of tax rates on crypto transactions and a regulatory framework.
It is vital to recall that the Finance Ministry in 2022 introduced one percent TDS on crypto transactions and 30 percent tax on capital gains that accrued on the sale of cryptocurrencies. That led to a massive fall in transaction volumes and now, the industry representatives have been urging the authorities to slash the rates in the forthcoming Budget 2024, if not roll back completely.
Let us hear it directly from the horse’s mouth.
Need of the hour
Shivam Thakral, CEO of BuyUcoin, believes that the Indian crypto industry is perched between potential and current limbo, and the need of the hour is a well-defined legal framework.
“The Indian crypto industry stands between boundless potential and frustrating limbo. In the upcoming budget, we urge the government to replace uncertainty with clarity, not with a heavy hand but with a guiding light. A well-defined legal framework should address taxation complexities, establishing clear guidelines for income and transactions, not as barriers but as stepping stones,” says Thakral.
He also urges for an integration of cryptos with traditional finance. “Seamless integration with traditional finance is possible by fostering collaboration and driving mainstream adoption. We understand the need for investor protection, but overzealous regulations could hurt our nascent ecosystem. Let’s find the sweet spot that fosters innovation while ensuring responsible participation,” he adds.
Slashing of tax rates
Ashish Singhal, Co-founder and Group CEO, PeepalCo believes that the current TDS rate of one percent on crypto transactions should be slashed to 0.01 percent, besides the permission to offset losses from sale of virtual digital assets (VDAs), and treating income from cryptos on par with other capital assets.
“India introduced its tax provisions for VDAs during the 2022 Budget. While the industry welcomed the inclusion of VDAs in the tax law, certain provisions, such as the high TDS rate have led many users to move to non-compliant foreign exchanges to trade, putting themselves at risk of losing their investment and breaking the law. It also led to lesser tax revenues for the exchequer,” says Singhal.
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Vikram Subburaj, CEO of Giottus, concurs with the argument. “The 30% tax on profits and the 1% TDS, announced in the 2022 Budget, have taken away a chunk of Indian investors to foreign exchanges who are inherently non-compliant with Indian regulations. We believe this drain can be prevented if taxation is rationalised.”
Sumit Gupta, CEO and co-founder, CoinDCX, too, has similar views about these tax provisions.
“We have advocated for a reduction in the TDS rate from 1 percent to 0.01 percent in our proposal for the impending Union Budget. Additionally, we have urged authorities to reconsider the flat rate of 30 percent applied to VDA income. The introduction of the 1 percent TDS on Indian exchanges last year has significantly impacted these platforms, resulting in an alarming 80 percent decrease in business volume.”
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Published: 25 Jan 2024, 05:38 PM IST