Crypto Quill

As the Union Budget 2024 approaches, the Indian cryptocurrency industry is abuzz with expectations. Industry leaders are advocating for a more supportive regulatory and tax environment to foster growth and innovation. The current framework, introduced over two years ago, has led to unintended consequences, pushing transactions to offshore platforms and complicating tracking efforts. Experts are calling for a reduction in the Tax Deducted at Source (TDS) on Virtual Digital Assets (VDAs) and clearer regulations to ensure a level playing field for the burgeoning digital economy.

Calls for Lower TDS on VDAs

The crypto industry is urging the government to lower the TDS rate on VDAs from the current 1% to 0.01%. This reduction is seen as crucial for bringing the majority of VDA transactions within the tax oversight mechanism. By lowering the TDS, the government can improve tax compliance and prevent capital flight. The current high TDS rate has been a significant burden on the industry, pushing many transactions to offshore platforms where they are harder to track and trace.

Ashish Singhal, Co-founder of CoinSwitch, emphasized the need for a conducive regulatory and tax environment. He believes that re-examining the tax treatment on VDAs in the upcoming budget is timely. Singhal suggested that permitting the offset of losses, similar to other sectors, 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 also be re-examined to ensure parity with other tech-enabled sectors.

Raj Karkara, COO of ZebPay, shared similar sentiments, highlighting the significance of 2024 for the crypto industry. He pointed out that the approval of Spot Bitcoin ETFs and Ethereum ETFs in the United States, along with SEBI’s stance to have multiple regulators oversee the crypto industry, are indicators of the wider acceptance of crypto as an asset class. These developments underscore the need for India to adopt a more supportive regulatory framework.

Regulatory Clarity and Support for Innovation

Regulatory clarity is another major expectation from the Union Budget 2024. The current lack of clear regulations has created uncertainty and hindered the growth of the crypto industry in India. Industry experts are calling for a well-defined regulatory framework that addresses the unique challenges and opportunities presented by VDAs. This includes clear guidelines on taxation, reporting requirements, and compliance standards.

Rajagopal Menon, Vice President of WazirX, emphasized the need for a level playing field and stable banking connections. He pointed out that foreign exchanges operate in a grey zone of regulatory and tax arbitrage, which puts Indian exchanges at a disadvantage. Menon believes that reducing the TDS from 1% to 0.01% would enable better tracking and tracing of transactions, aiding in tax collections and providing a more stable operational environment for crypto companies.

The crypto industry is also seeking support for innovation and blockchain development. Experts believe that a supportive regulatory environment will encourage investment in the Indian crypto ecosystem and foster the growth of new technologies. This, in turn, will contribute to the overall development of the digital economy and position India as a leader in the global crypto market.

The Road Ahead for the Indian Crypto Industry

The Union Budget 2024 is seen as a critical juncture for the Indian crypto industry. With the right regulatory and tax policies, the government can create an environment that supports growth and innovation. Lowering the TDS on VDAs and providing regulatory clarity are key steps in this direction. These measures will not only improve tax compliance but also prevent capital flight and encourage responsible trading practices.

Industry leaders are optimistic that the upcoming budget will address their concerns and pave the way for a more supportive regulatory framework. The approval of crypto ETFs in the United States and SEBI’s proactive stance are positive indicators for the future of the crypto industry in India. By adopting similar measures, India can ensure a level playing field for its crypto industry and foster the growth of the digital economy.

The crypto industry is hopeful that the Union Budget 2024 will bring the much-needed changes to the regulatory and tax environment. With lower TDS rates and clearer regulations, the industry can thrive and contribute to the overall economic growth of the country. As the budget announcement approaches, all eyes are on the government to see how it will shape the future of the Indian crypto industry.