The Indian crypto and Web3 industry has been pleading with the government to reduce crypto taxes, using social media as their platform of choice. Unfortunately, the industry’s concerns were not addressed in the interim budget speech presented by India’s Finance Minister, Nirmala Sitharaman, on February 1st. This has left the crypto sector feeling disappointed and neglected. However, there is still hope amongst industry members that changes may be implemented in the budget finalized by the elected government after the general elections later this year.
During her hour-long speech, Sitharaman made it clear that no tax changes will be incorporated at the moment. This announcement has dampened the spirits of those advocating for a reduction in crypto taxes. Rajagopal Menon, the vice president of WazirX, expressed his belief in the potential of crypto and virtual digital assets to empower individuals at the grassroots level. He urged the government to consider integrating provisions for long-term financing of domestic crypto projects, considering India’s pivotal phase in the crypto revolution. Menon also emphasized the industry’s request for a reduction in TDS rates to 0.01 percent and the offset of losses for traders.
The hashtag #ReduceCryptoTax has been trending in India for the past week, with thousands of posts demanding a revision of the country’s crypto tax policy. In July 2022, India imposed a one percent tax deduction on each crypto transaction and enforced a 30 percent tax on all crypto profits. This taxation system has reportedly resulted in a decline in crypto-related activities within India, leading to an exodus of Web3 talent and companies to more crypto-friendly nations. Some Indian crypto players have even announced staff cuts due to a drop in users and queries related to crypto.
The crypto sector had three main requests for this interim budget: flexible tax slabs, a reduction of TDS from one percent to 0.01 percent on each crypto transaction, and the ability to carry forward losses, similar to stocks. However, these suggestions were left unaddressed by the finance minister. On a positive note, she did propose a Rs. 1 Lakh crore corpus with a 50-year interest-free loan to support India’s youth. Crypto stakeholders interpret this as a step in the right direction, considering that 75 percent of India’s 19 million crypto investors are young individuals.
High TDS and income tax rates remain obstacles for the growth of India’s Web3 industry. Industry stakeholders will now have to wait for the final budget announcement in May to see if their concerns are addressed. Dilip Chenoy, Chairman of the Bharat Web3 Association (BWA), acknowledges that this was only a vote-on-account budget and therefore expects more substantial changes to be announced after the elections. Despite the disappointment caused by the interim budget, Chenoy remains optimistic about the state of the crypto sector in the country.
The Indian crypto sector’s plea for reduced taxes went unnoticed in the interim budget speech. While this has left industry members disappointed, they are hopeful that the elected government will implement changes in the final budget after the general elections. The industry believes that integrating provisions for long-term financing of domestic crypto projects and reducing TDS rates are crucial steps for empowering individuals and advancing India’s digital public infrastructure. Despite the hurdles, the youth’s significant interest in crypto and the finance minister’s proposal to support them financially indicate a potential bright future for the crypto sector in India.
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