Crypto industry stakeholders have high expectations from the upcoming Union Budget on July 23. They hope for a reduction in TDS and capital gains taxes on virtual digital asset transactions to encourage crypto adoption.
The Indian virtual digital asset (VDA) market has seen a decline in the last 2 years after 1 per cent TDS and 30 per cent VDA tax on gains was implemented in Budget 2022-23. Gains from VDAs are now taxed at a flat rate of 30 per cent irrespective of the individual’s income tax slab rate.
The industry has also expressed the need for a comprehensive regulatory framework for virtual digital assets. Last year, India called for a global framework to regulate such assets in the G20 meeting, and some officials indicated the government would analyze and decide its own position on crypto in the coming months.
Many platforms submitted their requests and recommendations to the Government of India and were also part of the BWA delegation that met with Finance Ministry officials as part of pre-budget consultations. Most of the proposals revolve around the central theme of equitable taxation in the virtual digital assets space in tandem with other asset classes.
Crypto Stakeholders Share Budget Expectations
Sumit Gupta, co-founder, of crypto exchange CoinDCX said, "To ensure a level playing field for the Indian VDA Industry compared to its offshore counterparts, we urge the government to expand the scope of the TDS mandate to include offshore platforms explicitly."
Additionally, we advocate for reducing the TDS rate on virtual digital asset (VDA) transfers under Section 194S(1) from 1 per cent to 0.01 per cent to stimulate industry growth. In pursuit of equitable taxation, we propose an amendment to Section 115BBH to reduce the tax rate from the current 30 per cent to at par with other asset classes. Further, we recommend revisiting the threshold limit for tax deduction under Section 194S, suggesting an increase from Rs 10,000 or Rs 50,000 to Rs 5 lakh in coherence with the provisions in Section 194-O of the Act.
Suman Banerjee, CIO, AIF Hedonova also called for a reduction in the TDS rate under Section 194S, to encourage market liquidity and participation and also equal treatment of crypto income with traditional income sources by amending Section 115BBH. "Additionally, the ability to set off and carry forward losses from VDAs, similar to other sectors, would promote long-term investment and strategic trading. Establishing a dedicated regulatory body to oversee crypto transactions would enhance transparency and investor protection," Banerjee said.
Mohammed Roshan Aslam, Co-founder & CEO of Bitcoin rewards platform GoSats said, “India is one of the few countries where middle-class residents are increasingly adopting cryptocurrencies. The government has been forthcoming about its intention to introduce regulations on crypto, providing prospective Indian investors with added incentives to rely on VDAs. However, while regulating crypto has received overwhelming support, its high taxation defeats the purpose. The crypto industry hopes that the upcoming budget will provide necessary support to investors and corporates, while also strengthening Indians' willingness to adopt this new asset class.”
