Crypto industry awaits Indian Budget 2024 with renewed hope for tax relief
India is gearing up for Union Budget 2024-25 and crypto industry players are hoping for major reforms.
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CoinSwitch co-founder Ashish Singhal told Cryptopolitan that the country needs a more supportive regulatory and tax environment to foster digital innovation.
The domestic crypto market wants conducive rules
Ashish Singhal, co-founder of Indian crypto exchange CoinSwitch, believes that the tax rules introduced in February 2022 need changes.
He said, “The current taxation framework for Virtual Digital Assets (VDAs), has led to unintended consequences even for the Govt and the exchequer.”
Singhal explained that domestic crypto investors have taken their trading to offshore platforms. Which has made it tricky for the government to keep tabs on these transactions.
India’s Crypto Journey:
2018: RBI bans crypto dealings; Supreme Court overturns in 2020.
2021: Govt proposes crypto ban; bill not introduced yet.
2022: India imposes a 30% tax on crypto transactions.
2024: Govt panel reviewing SEBI & RBI submissions. Report expected by June,… pic.twitter.com/x06uEWwLgM
— IshitaPandey.eth (@IshitaaPandey) May 16, 2024
India, which remains a major crypto market, concluded its general elections in June. The ruling party under PM Modi has been in power since 2014. While PM Modi is returning for a third term, he did not have an absolute majority this time around.
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India continues to lose millionaires, especially to the UAE, according to the latest New World Wealth report (see graphic for details).
While there might be several factors that lead to a decision to move, I… pic.twitter.com/ZKfcvF8D7Q
— Ashish Singhal (@ashish343) June 21, 2024
So far, the Indian government has not introduced a specific regulatory framework for cryptocurrencies. The last major move was the introduction of a taxation regime in the Union Budget 2022, which included a 30% tax on cryptocurrency earnings and a 1% Tax Deducted at Source (TDS) on all crypto transactions.
“We believe that with a new government in place, and to capitalize on India’s Web3 opportunity, a relook at the tax treatment on VDAs in the July 2024 Union Budget will be very timely,” Singhal added.
Top Budget recommendations include a tax cut
Singhal has pushed for a reduction in TDS. He noted, “Lower the rate of TDS on the transfer of VDAs from 1% to 0.01% under Section 194S to bring the majority of VDA transactions within the tax oversight mechanism, to improve tax compliance, and prevent capital flight.
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The executive also believes that just like other sectors, crypto should also have a provision for offsetting losses. According to Singhal, it will encourage responsible trading practices and reduce the risk of tax evasion.
SHOCKING NEWS IS COMING FROM INDIA🇮🇳 DESPITE THE BAN ON FOREIGN CRYPTO EXCHANGES.
88% of the volume remains on foreign crypto exchanges!
The Indian volume is 6,00,000 cr on these exchanges.
🇮🇳 hold $13.3 billion worth of crypto, of which $12.2 billion is on foreign exchanges.
— Kashif Raza (@simplykashif) June 13, 2024
Meanwhile, the VDA providers have been of the view that the administration should also slash down the 30% tax rate.
Singhal urges to “re-examine the flat rate of 30% applicable to income from the transfer of VDAs to ensure parity with other tech-enabled sectors.”
Can crypto fulfil India’s $5T dream?
Interestingly, India has been chasing to become a $5-trillion economy. In the last fiscal, it was estimated to be around $3.5 trillion with the target mark expected to reach by 2027-28.
The government has been ambitious that by 2025-26, technology and the digital economy will contribute 20-25% of the country’s GDP. At this time, the sectoral contribution is around half of the target.
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According to Statista, the crypto market could add a revenue of $343.5 million in 2024. The figure could reportedly reach $467 million by 2028. Between July 2022 and June 2023 India was the second-largest country by transaction volume with an estimated $268.9 billion.
That said, Singhal suggests that the government rethink its taxation threshold as major retail sellers are in the low-income bracket.
He said, “The threshold of Rs 10,000 / Rs 50,000 can also be revisited. Increasing the threshold will reduce the administrative burden on the tax department in processing refunds.”
If India decides to alleviate some tax burden of the crypto players, the industry might hail the administration for supportive regulations. These changes can also potentially contribute to the broader goal of expanding the GDP and the share of the digital economy.
Cryptopolitan reporting by Shraddha Sharma
