India’s Crypto Tax: A Boon Or Blessing? Here’s What The Experts Say

In India, cryptocurrency investors have been waiting with bated breath for information on how the government plans to tax digital assets. From April 1, India will tax all ‘virtual digital assets’ at 30%, according to Finance Minister Nirmala Sitharaman’s Budget 2022. The 1% TDS (tax-deductible at source) that applies to every single bitcoin transaction is seen as an issue by analysts. Regardless of his income level, the beneficiary is now required to pay 30% of his return as tax. Kunal Jagdale, Founder, BitsAir Exchange, said: “Although cryptocurrencies are described as assets in the budget, they are being handled differently than other assets. The biased behavior with cryptocurrencies in the recent budget could have some serious impact on the industry. People also feel that higher taxes will force the industry to leave the country. Some even think that too high a tax may prompt the industry to operate underground as well as move upcoming innovations overseas.” 1% TDS Is Keeping Traders Awake Traders, investors, exchanges, and everyone involved in the market are concerned about a 1% TDS. The 1% TDS rule on transfers of virtual digital assets, according to Sharat Chandra, VP-Research and Strategy at EarthID, a self-sovereign Identity Management Platform, will be a compliance nightmare for both investors and centralized exchanges in the absence of clear guidelines on how to implement TDS. He said: “Some of the investors have already moved their digital assets to wallets outside India. It’s likely to impact trading adversely. Crypto investors would shift to a peer-to-peer trading model and prefer decentralized exchanges over centralized exchanges. Intra-day frequent trading on exchanges will be impacted as TDS on multiple trades would mean a substantial deduction on trading income.” However, tax regulations governing cryptocurrency have provided taxpayers with some certainty regarding the tax burden they will face if they sell their crypto assets. So, however hard this tax is appearing to the traders, there are some possible pros to it. Let’s find out.  Possible Pros of the Crypto Tax According to Archit Gupta, Founder and CEO, Clear, a fintech company providing tax solutions, having at least some knowledge of what to expect in terms of taxes will enable investors in preparing for tax outflow. Proaasetz exchange’s Founder and Director, Manoj Dalmia, discusses some of the benefits of crypto taxation. At the very least, cryptocurrency is not outlawed in India (clarity on taxation). The government receives a good source of revenue in the form of taxes. Because cryptocurrency is a risky asset, investors will be less willing to speculate. More long-term investments may be made. Sanjeev Sanyal, India’s Principal Economic Adviser, stated on Monday that the government will take a balanced approach to the problem of cryptocurrency legislation because it affects the country’s financial stability. During the previous session of Parliament, the Centre announced its intention to introduce a bill on cryptocurrencies that would ‘provide a facilitative framework for the formation of the official digital currency to be issued by the Reserve Bank of India.’ It could not be introduced, however, because the draught bill had not been approved by the Cabinet. The Signs Have Been Positive Prime Minister Narendra Modi met with senior officials in November 2021 to discuss cryptocurrencies, and there were signs that severe regulatory action could be implemented. In recent months, there have been an increasing number of adverts, some starring even movie stars, promising easy and big returns on cryptocurrency investments, amid fears that such currencies are being exploited to deceive investors with false claims. The Parliamentary Standing Committee on Finance, chaired by BJP member Jayant Sinha, met with representatives from cryptocurrency exchanges, the Blockchain and Crypto Assets Council (BACC), and other organizations and came to the conclusion that cryptocurrencies should be regulated rather than banned in India.

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