February 7, 2023
By Anjali Kochhar
“No bad news for cryptos should be considered good news. The government has left the crypto taxation untouched, which is in line with the expectations”, said Dileep Seinberg, Founder, MuffinPay. Such is the stance of the Indian crypto industry after Finance Minister Nirmala Sitharaman announced budget 2023 on February 01. While this year’s budget brought several changes in taxation and infrastructure, it left crypto taxation unchanged.
Current crypto taxation structure
Last year, while presenting the 2022 budget, the union government recognized digital assets including cryptocurrency as “virtual digital assets (VDAs)”. Unprecedented it may be, this move was accompanied by heavy taxation on profits earned.
To begin with, profits or income earned from the transfer of VDAs will be taxed at 30 per cent at the end of each financial year. Except for the cost of acquiring these assets, no other deductions can be claimed when an investor declares VDA investments.
Each VDA will be charged separately. Thus, a profit rendered from one VDA cannot be set off with the loss rendered through another. A 1 per cent tax deduction at source (TDS) will also be levied, implied the finance minister.
Call for ‘rationalized tax regime’
Before the budget 2023 announcement, industry experts collectively called for a ‘rationalized tax regime’. This entailed declaring cryptocurrency as a ‘regulated’ asset while also reducing the TDS to 0.1 per cent. Even a reduction in 30 per cent taxation has also been put forth by crypto experts.
Surprisingly, the ask for a new regime was accompanied by a layer of practicality. Given the anti-crypto stance maintained by the Reserve Bank of India (RBI), the chances of the regime changing were bleak.
The reason is that the RBI has maintained its concerns about cryptocurrency being largely “unregulated”, driving a parallel economy. This was also one of the many reasons why India got its very own Central Bank Digital Currency (CBDC). But enough about the status quo.
Here’s what industry experts had to say –
“…hoping for a reduction in taxation” – Sumit Gupta, Founder, CoinDCX
After the budget 2023 announcement, the CoinDCX founder took to Twitter to express his stance about VDAs being left unchanged. “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.”
He went on to state how India has the potential to become a Web3 hub in the future. “
@CoinDCX has always been committed to partnering with the Government to devise policies that are conducive to the sustainable growth of the ecosystem. We have full faith that India can become the #Web3 hub of the world and wish to do everything we can to make this a reality.”
“… the government has left crypto taxation untouched” – Dileep Seinberg, Founder, MuffinPay
Largely, the crypto industry was the least bit surprised when budget 2023 did not introduce any changes in the taxation structure for VDAs. So, the possibility remains that with the existing taxation, investors are likely to shift their focus away from digital assets i.e., NFTs, crypto, etc.
“No bad news for cryptos should be considered good news. The government has left the crypto taxation untouched, which is majorly in line with the expectations. However, the government had mentioned them in the economic survey and the G-20 presidency is a viable opportunity for India to seek global cooperation on digital assets. It was pretty well expected from the current budget.”
Seinberg, however, cited a silver lining to the present circumstances. He reassured, “There will be no regulations coming on crypto before the election and clarity from global counterparts. Although it is well appreciated that the Government has acknowledged the power of Web3 & Metaverse and its utility in the Agriculture sector. It will unleash innovation and research by start-ups and academia, a National Data Governance Policy will be brought out. This will enable access to anonymized data.”
“…no changes in taxation were something expected with regards to digital assets” – Mahin Gupta, Founder of Liminal
A possible reason behind taxation being left unchanged is that RBI is still testing CBDC. There is no denying that it is uncharted territory, with no guarantee or success estimation. Thus, it is too soon for the RBI to go back on its anti-crypto stance.
“No changes in taxation were something expected with respect to digital assets as the government is still testing the waters with the CBDC pilot project underway.”
Gupta however, went on to appreciate the government’s attention to digital infrastructure. “Public digital infrastructure for the agricultural sector under an open-source standard will revolutionize the industry, propelling it to unprecedented levels of growth. By harnessing the power of 5G, Web 3.0, and Metaverse technologies, GDP growth can be accelerated by a significant percentage. This digital infrastructure, ranging from supply chain optimization to analytics, will bolster the agriculture value chain and make it even stronger and more productive.”
“..focus on infrastructure development in the current budget will boost physical and digital infrastructure” – Shivam Thakral, CEO of BuyUcoin
Budget 2023 emphasized the need for infrastructural development in India – both physical and digital. This would be accompanied by the creation of an ecosystem centered around artificial intelligence (AI). So, how does this relate to digital assets?
Indirectly implied, a boost in digital infrastructure will lead to the growth and penetration of blockchain technology and of course, Web 3. So, while the crypto industry was focusing on the taxation structure, Thakral had an optimistic take on budget 2023.
“The focus on infrastructure development in the current budget will boost physical and digital infrastructure for catalyzing India’s economic growth and make achieve the target of a $5 trillion digital economy. Overall, this budget accommodates the aspirations of ambitious India which is poised to make its mark at a global level,” he said.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.