February 3, 2022
In what comes as a much-awaited move for the industry, the Indian government announced a 30% ‘crypto tax’ in the Union Budget 2022-2023.
Insiders welcomed the positive stance of the government towards cryptocurrencies, but they are still looking for further details.
As soon as the move was announced, the crypto market was euphoric as evidenced by soaring trading volume on Indian exchanges such as WazirX. WazirX exchange’s native token, WRX, too surged nearly 30% immediately after the announcement.
Blockchain Asset Review has reported that industry insiders continued to call for more regularity clarity for the sector ahead of the budget, especially in the wake of high-profile tax probes on some leading crypto exchanges.
Experts’ take on ‘crypto tax’
Sumit Gupta, co-founder and CEO of CoinDCX, said: “Taxation of virtual digital assets or crypto is a step in the right direction. It gives much-needed clarity and confidence to the industry. India’s focus on digital innovation and the promotion of blockchain technology is welcome.”
Nischal Shetty, CEO of WazirX, called the move “positive” for the sector. “The tax clarity is a welcome move. Overall, it’s a huge relief to see that our government is adopting the progressive stance of going ahead in the direction of innovation.”
“By bringing in taxation, the government legitimizes the industry to a large extent. The majority of people, especially corporates, who have been sitting on the sidelines because of uncertainties will now be able to participate in crypto,” Shetty told Blockchain Asset Review.
Shivam Thakral, CEO of BuyUcoin, called the step a “booster dose” from the regulators for the industry that was pending for a long time.
“The most significant development is the 30% tax on the income from the transfer of digital assets, which clearly shows the government’s inclination towards legalizing crypto in India. The cost of acquisition of crypto assets to be allowed as a deduction is expected to drive mass adoption of crypto and boost investor confidence,” Thakral told Blockchain Asset Review.
“The 1% TDS is new for the industry and we will have to wait for finer details to gauge its effect on the crypto trading in India,” he added.
He further noted that the move will legalize the billions of dollars invested in crypto-assets and create a new tax revenue stream for the government.
Charles Tan, head of marketing at Coinstore, said: “The tax announcement on crypto-related income will not only give legal status to crypto in India but will take out the regulatory fears from the minds of the crypto investors.”
Ravi S. Raghavan, a partner at Majmudar & Partners, noted that tax clarity was much needed at the moment, especially at a time when there was no regulation governing the crypto asset.
Raghavan said: “The RBI has repeatedly reiterated its strong views against cryptocurrencies, saying they pose serious threats to the macroeconomic and financial stability.”
He added: “So I think the government just stopped short of calling it a speculative transaction taxing it at 30% and did not allow for any set-off or losses. This is the first step towards regularizing digital assets and a welcome one,” Raghavan told Blockchain Asset Review.
Some experts such as Jay Hao, CEO of OKX.com, disagree and believed that higher taxes might discourage investors from choosing crypto as an investment avenue and delay the mass adoption of assets in the country.
“The taxation of profit from crypto assets at 30% may not receive equal appreciation from all the stakeholders,” Hao said. “The higher taxes may discourage investors from choosing crypto as an investment avenue and delay the mass adoption of crypto assets in India.”
Pratik Gauri, founder and CEO of the blockchain 5ire, believed that while the move might discourage some investors because on the surface it appears severe but it will increase the adoption of digital assets in the country.
Finance minister Nirmala Sitharaman on Tuesday announced a 30% tax on any income from the transfer of virtual digital assets with no deductions and exemptions allowed. “Any income from virtual digital assets is taxable at 30 percent,” the finance minister said while presenting the federal budget.
“There will be no deduction with exception of the cost of acquisition. The TDS is applicable beyond a specified monetary threshold, and the gift of virtual currencies is taxable in the hands of the recipient.”
The finance ministers added that the gifts will be taxed on the hands of the recipient and there will be a one percent tax deducted at source on the payments made for the transfer for the transfer of digital assets.
The finance minister also announced that India may soon roll out its digital currency using blockchain technology.
“Introduction of a central bank digital currency will give a big boost to the digital economy,” Sitharaman said while presenting the federal budget. “Digital currency will also lead to a more efficient and cheaper currency management system.”
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.