Ali Raza
The crypto regulatory framework for cryptocurrencies in India has often been referred to as unfriendly because of the heavy crypto taxation laws. The 2023 Union Budget does not show reprieve for crypto investors in the country as it fails to mention cryptocurrencies, blockchain technology, and the entire Web3 sector.
Crypto taxes in India to remain high
The 2023 Union Budget is friendly towards the middle class because it has a provision for income tax concessions for the middle class. However, these benefits will not be extended to the cryptocurrency sector in India, which will still be burdened by the heavy taxation policy.
India’s finance minister, Nirmala Sitharaman, announced the implementation of a flat 30% tax on cryptocurrencies during the 2022 budget. This tax rate has not been reduced despite the criticism it faces during implementation, with India’s crypto community saying it will stifle the industry’s growth.
Besides the hefty 30% tax on cryptocurrency gains, the policy also includes another 1% TDS that applies to all cryptocurrency transactions. This tax policy has hampered the growth of India’s crypto industry. Some of India’s largest crypto trading platforms have reported a 90% decline in trading volumes over the past year.
Moreover, crypto startups have also shied away from setting base in the Indian crypto market, and they now prefer overseas locations with friendly crypto regulatory and taxation frameworks. Given that crypto investors in the country are facing another year of unfriendly taxation laws, it is likely that crypto investments in the country will continue to drop.
Nevertheless, it was expected that the high crypto taxes would be maintained in this year’s budget. The former Finance Secretary of India, Subhash Chandra Garg, had previously called for more clarity in crypto taxation and said no changes would be seen in this year’s budget. Chandra led the committee that drafted the first crypto bill in India.
Breaking
The former Finance secretary of India Mr Subhash Chandra Garg says “Crypto taxes need a lot more clarity & he might not see any new changes in the upcoming budget 2023”.
What are your thoughts? pic.twitter.com/eVXE0sC6Pl
— KoinX (@getkoinx) January 30, 2023
Crypto community reacts to unchanged crypto taxes
The crypto community in India has reacted to the news about the unchanged crypto taxation policy. The CEO and co-founder of CoinDCX, Sumit Gupta, commented on this development saying that the high taxes forced investors to shift their investments to overseas exchanges. Gupta also noted that India has one of the highest crypto taxation policies, which was “not good” for the country and those building in the industry.
3/5 Was, obviously, hoping for a reduction in income tax on VDAs but that didn't happen. India has one of the highest taxes on VDAs in the world. This is causing Indian users to shift their investments overseas. Not good for our country and those building in this sector in India
— Sumit Gupta (CoinDCX) (@smtgpt) February 1, 2023
The vice president of India’s largest cryptocurrency exchange WazirX, Rajagopal Menon, noted that despite the Union Budget 2023 failing to provide relief to crypto investors, no more negative consequences would be seen in the industry, as 2022 was the worst year on record. Menon anticipates that trading volumes on Indian-based exchanges will remain low.
While India is yet to declare an outright ban on cryptocurrencies, the heavy taxes are deterring people away from digital assets. The country has yet to develop a clear regulatory framework for digital assets to protect investors. Moreover, global regulators are looking towards a harmonized crypto regulatory and taxation framework.
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This article was written for Business 2 Community by Ali Raza.
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