India’s Budget 2024 Awaits with High Stakes for Digital Economy and blockchain 

January 16, 2024

By Anjali Kochhar

In the midst of a global digital upheaval, India anticipates pivotal changes in its economic landscape as it prepares for Budget 2024. With technology steering the way for innovation and economic growth, governments worldwide are grappling with the challenge of aligning taxation strategies with the dynamic nature of the digital economy.

The digital economy, an expansive ecosystem encompassing e-commerce, artificial intelligence, and more, has outgrown traditional tax frameworks. This has triggered a global conversation about the imperative need for tax reforms in the digital age.

Expectations for Budget 2024

Introduction of Digital Services Tax (DST):

A significant expectation for Budget 2024 is the potential introduction of a Digital Services Tax (DST). This tax, already implemented by several countries, aims to ensure that multinational tech giants contribute their fair share of taxes in the countries where they operate.

Global Tax Reforms:

India is likely to address ongoing global discussions about revamping international taxation frameworks. With talks underway at the Organisation for Economic Co-operation and Development (OECD), Budget 2024 might unveil India’s position on global tax initiatives, emphasising the need for a fair distribution of taxing rights among nations.

E-commerce Taxation Revisions:

The rapid growth of e-commerce necessitates a reevaluation of taxation policies. Budget 2024 may introduce amendments to the Goods and Services Tax (GST) framework, streamlining tax procedures for e-commerce platforms to contribute more effectively to the country’s revenue.

Incentives for Digital Innovation:

To bolster India’s position in digital innovation, the Budget may unveil incentives for businesses engaged in research and development of digital technologies. Tax benefits and incentives could encourage investment in cutting-edge fields like artificial intelligence, blockchain, and sustainable digital infrastructure.

Data Localisation and Privacy Measures:

Given growing concerns about data security and privacy, Budget 2024 may introduce measures for data localisation, requiring companies to store and process data within the country.

Compliance and Enforcement Strengthening:

The Budget may allocate resources towards strengthening tax enforcement capabilities, leveraging technological advancements for better tracking of digital transactions. Ensuring compliance by businesses operating in the digital space is essential for a fair and efficient tax system.

Manhar Garegrat, Country Head at Liminal Custody Solutions, highlights the importance of the Union Budget 2023 in shaping India’s role in the digital asset revolution. Liminal proposes key expectations for a thriving digital asset landscape. Firstly, a clear definition of Virtual Digital Assets (VDAs) is needed, especially for tokenised real-world assets. Liminal suggests amending the VDA definition to exclude tokenised assets with proven value, fostering an inclusive ecosystem. Secondly, the removal of the 1% Tax Deducted at Source (TDS) is urged, with a proposal for tax breaks to encourage domestic participation, attract investment, and boost security infrastructure. Lastly, prioritising Research and Development (R&D) in Web3 projects is emphasised, calling for inclusive government sandboxes and strategic investments in digital asset security and compliance.

Shivam Thakral, CEO of BuyUcoin, India’s second-longest digital asset exchange, urges the government to bring clarity to the crypto industry in the upcoming budget. Thakral emphasises the need for a well-defined legal framework that addresses taxation complexities, making guidelines clear for income and transactions. He advocates for exchange licensing to be a badge of honor, promoting responsible participation rather than being restrictive. Thakral highlights the potential of seamless integration with traditional finance through collaboration and mainstream adoption. He calls for a balance between investor protection and avoiding overregulation to allow India’s crypto industry to flourish, attract global players, and support domestic startups. Thakral envisions tax incentives and sandboxes as vital tools to nurture innovation, create jobs, and propel India into the global DeFi and blockchain space.

Om Malviya, President at Tezos India, highlights the hurdles faced by India’s blockchain potential, emphasising the need for clarity in the upcoming budget. The legal ambiguity, taxing complexities, and scarcity of talent hinder startups. Malviya urges a revisiting of digital asset taxation, especially Transaction Deducted at Source (TDS), proposing a relaxed limit for short-term capital gain tax. He advocates for a comprehensive framework covering diverse applications like healthcare and secure voting. Clear taxation guidelines and talent development initiatives are crucial for startup growth. Malviya emphasises the importance of sandbox projects, government collaboration, and the transformative power of blockchain for unprecedented transparency and efficiency. The upcoming budget holds immense significance, calling for clearer regulatory pathways, tax incentives, and R&D initiatives to propel India’s growing blockchain ecosystem.

As the digital and crypto industries eagerly await the unveiling of Budget 2024, India stands at a critical juncture to position itself as a leader in the digital economy. Striking a balance between fostering innovation, attracting investments, and ensuring fair taxation will be a delicate task. The upcoming budget represents a pivotal moment for India to adapt its fiscal policies to meet the demands of the 21st century, shaping the trajectory of its economic future.

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.

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