Indian crypto industry expects the government to reconsider the current tax structure for crypto
The Union Budget 2023 is scheduled to be discussed on 1 February 2023. After imposing a 30% fixed tax rate on all income generated through crypto trading in Budget 2022, crypto experts have certain expectations this time from Finance Minister Nirmala Sitharaman’s Union Budget 2023. The Indian crypto industry and several exchange platforms and tax firms expect the government to reconsider the current putative tax structure for crypto and bring it to par with other normal business activities. They request the Government to also consider reducing the TDS rate to 0.01 percent from the current 1 percent and also to identify virtual digital assets as regulated asset.
Tarusha Mittal, Co-founder and COO, UniFarm and Dapps, says, “the government should frame strong regulations for the sector in light of the FTX crisis [which wiped out billions of dollars in global investor money] especially for centralized bodies dealing with crypto.”
The sector also hopes that the government would allow crypto investors to offset and carry forward their losses to create a level-playing field for virtual digital assets (VDAs) in India. Crypto bosses further expect the TDS exemption limit to be raised “to a reasonable level”.
According to a report by Esya Centre, a New Delhi-based technology policy think-tank, and Taxsutra, a B2B tax portal, the current tax architecture for VDAs may lead to a loss of approximately $1.2 Tn (INR 99.3 Lakh Cr) of local exchange trade volume in the next four years relative to a pro-market scenario where (a) TDS on VDAs is at par with that on securities (b) Tax policy allows the provision to setoff losses (c) Taxation of gains from VDAs is internationally competitive.
“The idea of the government was very simple. They wanted to know how many crypto transactions are happening because they felt that a lot of people were not showing it in their returns. This is why they had this 1% TDS imposed on the seller. While most of the Indian exchanges implemented this since the rule came into implementation from July 1, foreign exchanges didn’t as they are out of Indian jurisdiction…we have to remember that crypto is truly global,” explained Rajgopal Menon, VP, WazirX.