BENGALURU: In Budget 2022, the government announced a 30% tax and a 1% TDS (Tax Deducted at Source) on all crypto transactions. For the past year, crypto exchanges have been asking the government to provide clarity on taxation and they hope that in this upcoming Budget, which will be presented by Finance Minister Nirmala Sitharaman on February 1, the government will reduce TDS and also address the uncertainty around the industry.
Though the industry witnessed rapid growth in India, certain events such as the failure of Luna and the collapse of exchanges like FTX and Celcius, have jolted users' confidence. Moreover, RBI governor Shaktikanta Das has been maintaining a strong stance against crypto. He also said that it may be misused as a tool for money laundering.
Rahul Pagidipati, CEO, ZebPay, said, "While it is great to see the government take a step towards regulating VDAs, in the upcoming budget 2023, we urge the government to create a progressive regulatory framework and offer clarity on taxation by reducing TDS and Capital Gains Taxes and levelling them with other asset classes such as stocks and bonds."
He added, "This will address the ongoing concerns and uncertainty about the industry by creating transparency and help industry players to protect users from any kind of black swan events like the FTX collapse. Clear governance and regulatory framework will enable more people to invest in VDAs and attain financial freedom."
Many crypto exchanges have started releasing their proof of reserves in order to be transparent and also to gain investors' confidence.
The industry hopes for a further revision in the definition of VDAs in the upcoming Finance Bill separating crypto-based tokens from non-crypto-based tokens and separate tax regimes for each.
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In June 2022, the Ministry of Finance made carve-outs in the definition of VDAs, excluding (a) tokens whose transfer results in the transfer of ownership of the underlying tangible asset; (b) gift cards or vouchers; (c) mileage points, reward points or loyalty card, being a record given without direct monetary; and (d) subscription to websites or platforms or application, said Ankit Wadhwa, Co-founder and CEO, Rario.
The government should ensure fast-track implementation of the regulatory framework for crypto exchanges, raise the TDS exemption limit on VDAs and offer relief on crypto taxation, said Vikram R Singh, Founder and CEO, Antier.
"Currently, cryptocurrencies and the recently launched CBDC by the RBI appear to be on opposite sides of the blockchain spectrum. However, there is massive scope for coexistence and interdependence. CBDC can be a great way to bridge the gap between multiple cryptocurrencies, and both can coexist. Being the central bank, the RBI has every reason to play safe and do its due diligence before the adoption of technologies like DeFi lending, but we look forward to positive announcements," he added.
Also, 2023 will be a crucial year for crypto. "The crypto world is likely to remain volatile for the upcoming few months until the first world countries like MiCA in Europe and the US give a clear indication about the future of crypto. Announcements from the finance minister will highlight the guidance of India's viewpoint on the crypto industry. Tax tweaks and new announcements are paramount for the industry at large," said Dileep Seinberg, Founder, MuffinPay, Crypto Neobank.