India, the fifth largest economy in the world, has been progressively moving towards adopting digital assets. There was a widespread assumption that the country might ban cryptocurrencies, but its annual budget session cleared its intention of not doing so by announcing taxes.
On February 1, The Finance Ministry of India, in its annual budget session for 2022-2023, introduced a 30% capital gains tax and 1% transaction tax deductions at source. With a 30% tax on crypto, it is the highest tax band for any asset the government charges.
All receivable digital asset gifts will be taxed (to the giver), and there will be no deductions on taxes related to gains from crypto trading. Deductions offset your losses from one income to another so that you are not charged according to the regular tax slab.
However, the country’s crypto advocacy group isn’t satisfied with the tax figures. Recently, Bharat Web3 Association (BWA), a prominent Indian community of cryptocurrency advocates, has submitted recommendations to the finance ministry ahead of the upcoming budget session 2023-2024. The association has numerous members from the crypto sector, including Coinbase, CoinDCX, CoinSwitch, Kuber, and Polygon, as founding members alongside others.
In its draft of recommendations and concerns, the group has highlighted the 30% taxes on cryptocurrency and the uncertainty over regulations as highly problematic. Following the association’s recommendations, a meeting between the ministry and the group’s representatives is expected to occur next week.
Sources reveal that the association members have cited the tax policies as unfriendly and hurtful to the growth of the crypto business in the country. The representative in their media briefings said that the association intends to bring to light the effect of the tax policies like the tax deductions at source (TDS), taxing of income from virtual digital assets (VDAs), and not allowing carrying forward of losses to the industry. They also wish to assist the government in helping them shape the regulatory framework that can be mutually beneficial for the government and the industry.
“The BWA aims to highlight the impact of the existing tax provisions such as TDS, tax on income from VDAs, and not allowing carrying forward of losses on the wider industry and share its inputs on suitable amendments which can help address the concerns of the government and at the same time allow growth of this sector.”
According to the association’s figures, these moves have been highly hurtful to crypto trading, given that Indian crypto exchanges witnessed a decline in trading volume running in the range of 90%. While the TDS can be claimed, traders don’t find it convenient and beneficial to have their capital caged, and the industry representatives have been demanding to bring it down from 1% to 0.1%.
The association’s representatives said they are engaging with the government to ensure a solid and efficient regulatory framework is implemented and complied with. The association has requested the country’s finance ministry to frame strong regulation for the crypto sector, throwing light on the collapse of the FTX and triggering a market crisis.
The representatives also opined that the collapse of the FTX was due to a lack of corporate governance, which is also prevalent in the traditional financial system. The presence of a stable regulatory environment helps the crypto business to improve the scenario.
India is actively progressing towards establishing a crypto framework. Earlier this year, it conveyed its intention to seek guidance from the G-20 members in its presidency of G-20 that began in December. Even without a crypto regulatory framework, Indians have heavily invested in it. Todayq News reported that as of June 2022, there were approximately 115 million investors nationwide.