The crypto industry in India is hopeful for changes that will foster growth and innovation from Budget 2024. Industry experts have expressed their expectations, calling for a regulatory and tax environment that better supports the booming digital economy.
The current framework, introduced over two years ago in the February 2022 Budget, has led to some unintended consequences, pushing transactions to offshore platforms and making it harder to track and trace them.
Ashish Singhal, Co-founder of CoinSwitch, highlighted the need for a conducive regulatory and tax environment.
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He said, “We urge them to create a conducive regulatory and tax environment that supports the burgeoning digital economy and fosters innovation. The current taxation framework for Virtual Digital Assets (VDAs), introduced over two years back in the Feb 2022 Budget, has led to unintended consequences even for the Govt and the exchequer, primarily via a massive shift in VDA transactions to offshore platforms, impacting tracking and tracing of such transactions.”
Singhal believes that re-examining the tax treatment on VDAs in the July 2024 Union Budget is timely.
He suggested a lower the rate of TDS on the transfer of VDAs from 1% to 0.01% under Section 194S, aimed to bring the majority of VDA transactions within the tax oversight mechanism, improve tax compliance, and prevent capital flight.
“Permit the offset of losses similar to other sectors. This would encourage responsible trading practices and reduce the risk of tax evasion. The flat rate of 30% applicable to income from the transfer of VDAs should be re-examined to ensure parity with other tech-enabled sectors,” said Singhal.
Raj Karkara, COO of ZebPay, shared similar sentiments, highlighting the significance of 2024 for the crypto industry.
He said, “2024 is shaping up to be a significant year for the crypto industry. We’ve seen the approval of Spot Bitcoin ETFs and the ongoing approval of Ethereum ETFs in the United States, as well as the recent ‘Bitcoin Halving’, a monumental event for the Web3 and crypto ecosystem. Along with this, SEBI’s stance to have multiple regulators oversee the crypto industry has generated anticipation within the industry. These are indicators that show the wider acceptance of crypto as an asset class.”
Karkara mentioned the importance of regulatory clarity to create a secure and transparent investment ecosystem.
“Regulatory clarity is one of the most crucial steps towards creating a secure and transparent investment ecosystem for all stakeholders,” he said.
He expressed hope that Budget 2024 would propose a collaborative approach between the government and the larger Web3 industry.
Following the positive developments at the G20 summit last year, he believes a comprehensive regulatory framework is necessary. He also supports reducing TDS and Capital Gains Taxes to create a more inclusive ecosystem and enable more investors to participate actively.
Clear regulations, he said, would not only propel innovation but also enable the industry to explore blockchain’s full potential, bringing about transformative change and driving financial independence in the country.
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