Crypto Quill

India’s Web3 community, which comprises of crypto investors, developers, entrepreneurs, and enthusiasts, has launched a social media campaign to demand tax relief for crypto-related activities in the upcoming budget session. The campaign, which uses the hashtag #ReduceCryptoTax, aims to draw the attention of the government and the public to the challenges faced by the Web3 sector due to the existing tax rules.

Crypto tax rules hamper innovation and growth

The Web3 community argues that the current tax rules for crypto transactions are unfair, outdated, and detrimental to the innovation and growth of the sector. According to the rules, which came into effect in July 2022, crypto transactions are subject to a 1% tax deducted at source (TDS) and a 30% capital gains tax. Moreover, crypto losses cannot be carried forward, unlike stocks.

These rules have created a lot of confusion and frustration among the Web3 stakeholders, who claim that they are paying double taxation and facing difficulties in filing their returns. Many have also expressed their fear of losing their competitive edge and talent pool to other countries that offer more favorable tax regimes for crypto.

Web3 community demands three changes in the budget

The Web3 community has put forward three specific demands to the government through the #ReduceCryptoTax campaign. These are:

• Flexible tax slabs: The community wants the government to introduce different tax slabs for crypto transactions based on the holding period, similar to stocks. For instance, long-term capital gains tax could be lower than short-term capital gains tax, to encourage long-term investment and discourage speculation.
• Reduction of TDS: The community wants the government to reduce the TDS on crypto transactions from 1% to 0.01%, to ease the cash flow and compliance burden on the crypto users and platforms. The community argues that the 1% TDS is too high and arbitrary, as it does not reflect the actual profit or loss of the transaction.

• Allowance of carrying forward losses: The community wants the government to allow crypto users to carry forward their losses, like stocks, to offset their future gains. This would help them to reduce their tax liability and incentivize them to stay invested in the sector.

Web3 leaders and influencers support the campaign

The #ReduceCryptoTax campaign has received support from various Web3 leaders and influencers, who have voiced their opinions and suggestions on social media. Some of them are:

• Sathvik Vishwanath, CEO of Unocoin, one of India’s oldest crypto exchanges, tweeted that “The regulators and policy makers need to make sure that the local rules and policies from time to time balances between innovation, taxation and future global prospect.”
• Sumit Gupta, CEO of CoinDCX, India’s largest crypto exchange, tweeted that “India’s Web3 community deserves a fair and progressive tax regime that fosters innovation and growth. We urge the government to consider our demands and make the necessary changes in the budget.”
• Nischal Shetty, CEO of WazirX, India’s most popular crypto platform, tweeted that “India has a huge potential to become a global leader in Web3, but we need a supportive and conducive environment. We hope the government listens to our voice and gives us a fair chance to grow and contribute to the nation.”
• Tanvi Ratna, founder and CEO of Policy 4.0, a blockchain policy consulting firm, tweeted that “Web3 is not just about crypto, it’s about a new paradigm of internet that empowers users and creators. India needs to adopt a forward-looking and holistic approach to regulate and tax this sector, not just piecemeal and reactive measures.”

Budget 2024 to be presented on February 1

The Finance Minister of India, Nirmala Sitharaman, will present the budget for 2024-2025 on February 1, 2024. This is the last budget session before the nation goes into the Lok Sabha elections. The Web3 community hopes that the budget will address their concerns and provide them with some relief and clarity on the tax front.